Consistent XVA Metrics Part I: Single-Currency

23 Pages Posted: 15 Mar 2017 Last revised: 10 Jun 2017

Date Written: March 17, 2017

Abstract

We present a consistent framework for computing shareholder and firm values of derivative portfolios in the presence of collateral, counterparty risk and funding costs in a single currency economy with stochastic interest rates and spot assets with local volatility. The follow-up paper Kjaer extends this setup to a multi-currency economy and the resulting valuation adjustments have been implemented in the forthcoming Bloomberg MARS XVA product.

Keywords: Shareholder and Firm Values, Valuation Adjustments, Counterparty Risk, Collateral, CSA Discounting, Bloomberg MARS XVA

JEL Classification: G13

Suggested Citation

Kjaer, Mats, Consistent XVA Metrics Part I: Single-Currency (March 17, 2017). Available at SSRN: https://ssrn.com/abstract=2932335 or http://dx.doi.org/10.2139/ssrn.2932335

Mats Kjaer (Contact Author)

Bloomberg L.P. ( email )

39-45 Finsbury Square
City Gate House
London, EC2A 1PQ
United Kingdom

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