A unified approach to xVA with CSA discounting and initial margin

Francesca Biagini, Alessandro Gnoatto and Immacolata Oliva

Papers from arXiv.org

Abstract: In this paper we extend the existing literature on xVA along three directions. First, we enhance current BSDE-based xVA frameworks to include initial margin in presence of defaults. Next, we solve the consistency problem that arises when the front-office desk of the bank uses trade-specific discount curves (CSA discounting) which differ from the discount rate adopted by the xVA desk. Finally, we clarify the impact of aggregation of several sub-portfolios of trades on the xVA-valuation of the resulting global portfolio and study related non-linearity effects.

Date: 2019-05, Revised 2021-03
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Citations: View citations in EconPapers (5)

Published in SIAM Journal on Financial Mathematics (2021) forthcoming

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1905.11328

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