Derivatives Funding, Netting and Accounting
11 Pages Posted: 1 Feb 2015 Last revised: 20 Mar 2017
Date Written: March 20, 2017
In this article we expand the semi-replication framework by Burgard and Kjaer to derivative books with multiple counterparties. We then find the funding strategy that corresponds to the recent funding value adjustment accounting proposal by Albanese and Andersen. This strategy is asymmetric and non-additive across counterparties. In contrast, funding strategies that recycle positive cash for other funding purposes enable symmetric funding strategies which also generates higher economic value than under the proposed asymmetric methodology.
Keywords: Derivatives, Funding, Netting, Accounting, FVA, XVA, DVA, CVA, FTP
JEL Classification: G13, G24, G32, G33, M41
Suggested Citation: Suggested Citation