FVA, Modelling and Netting Arbitrage - Introduction

16 Pages Posted: 9 Jan 2013 Last revised: 7 Jan 2016

Date Written: June 3, 2012

Abstract

After Lehman default and the Euro Crisis (crisis which started mid-2007), the industry started to consider the funding risk as a major risk. The practitioners began to charge for their funding cost. In this stressed context, the FVA has been the subject of intense debate, even its definition is not well established. In this article we follow the footsteps of Kamtchueng by establishing netting arbitrage in the FVA framework relative to our hedging strategy. It is the first time that the FVA is related to another funding spread.

Keywords: FVA, netting, arbitrage, funding valuation adjustment, funding cost

JEL Classification: C00, C15, C52, C63, G12, G13

Suggested Citation

Kamtchueng, Christian, FVA, Modelling and Netting Arbitrage - Introduction (June 3, 2012). Available at SSRN: https://ssrn.com/abstract=2197765 or http://dx.doi.org/10.2139/ssrn.2197765

Christian Kamtchueng (Contact Author)

CTK corp ( email )

Canary Wharf
LONDON

HOME PAGE: http://www.cityquant.com

ESSEC Business School ( email )

3 Avenue Bernard Hirsch
CS 50105 CERGY
CERGY, CERGY PONTOISE CEDEX 95021
France

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