Funded Bilateral Valuation Adjustment

Lorenzo Giada and Claudio Nordio

Papers from arXiv.org

Abstract: We show how the cost of funding the collateral in a particular set up can be equal to the Bilateral Valuation Adjustment with the "funded" probability of default, leading to the definition of a Funded Bilateral Valuation Adjustment (FBVA). That set up can also be viewed by an investor as an effective way to restructure the counterparty risk arising from an uncollateralized transaction with a counterparty, mitigating or even avoiding entirely the additional capital charge introduced by the new Basel III framework.

Date: 2012-11
New Economics Papers: this item is included in nep-rmg
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