Structured XVAs

32 Pages Posted: 22 Nov 2022 Last revised: 16 Jan 2023

Date Written: January 15, 2023

Abstract

Using a continuous time, structural model of a dealer-bank, we derive fair value equations for credit risky financial products that can not be perfectly hedged, fully taking into account the impact the contracts have on the dealer-bank's earnings volatility and, consequently, their solvency and financing costs.

Keywords: Derivatives, XVA, Jump-Diffusion, Credit Valuation Adjustments, Capital Valuation Adjustment, Funding Valuation Adjustment, Risk Capital, Structural Model, Default Correlation

JEL Classification: G12, G13, G2, G24, G20, G21, G3, G30, G31, G32, G33

Suggested Citation

Renzitti, Stefano, Structured XVAs (January 15, 2023). Available at SSRN: https://ssrn.com/abstract=4281817 or http://dx.doi.org/10.2139/ssrn.4281817

Stefano Renzitti (Contact Author)

S&P Global ( email )

1066 West Hastings Street
Vancouver, British Columbia V6E 3X1
Canada

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