KVA Unmasked

17 Pages Posted: 19 Mar 2018 Last revised: 15 Mar 2019

Date Written: February 21, 2018

Abstract

We extend the single period structural model from Kjaer \cite{mk2017c} to continuous time. The resulting valuation adjustment formulas look as expected and are to be evaluated under a dealer financing probability measure. We also show what it means to hedge the capital valuation adjustment.

Keywords: Valuation Adjustments, Fair Valuation, Indifference Pricing, Regulatory Capital

JEL Classification: G13

Suggested Citation

Kjaer, Mats, KVA Unmasked (February 21, 2018). Available at SSRN: https://ssrn.com/abstract=3143875 or http://dx.doi.org/10.2139/ssrn.3143875

Mats Kjaer (Contact Author)

Bloomberg L.P. ( email )

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

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