Funding Value Adjustments
We demonstrate that the funding value adjustments (FVAs) of major dealers are debt-overhang costs to their shareholders. In order to maximize shareholder value, dealer quotations therefore adjust for FVAs. Our case examples include interest-rate swap FVAs and violations of covered interest parity. Contrary to current valuation practice, FVAs are not themselves components of the market values of the positions being financed. Current dealer practice does, however, align incentives between trading desks and shareholders. We also establish a pecking order for preferred asset financing strategies and provide a new interpretation of the standard debit value adjustment (DVA)
Year of publication: |
2017
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Authors: | Andersen, Leif B. G. |
Other Persons: | Duffie, Darrell (contributor) ; Song, Yang (contributor) |
Publisher: |
[2017]: [S.l.] : SSRN |
Subject: | Börse | Bourse | Swap | Wertberichtigung | Value adjustment |
Saved in:
freely available
Extent: | 1 Online-Ressource (71 p) |
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Series: | NBER Working Paper ; No. w23680 |
Type of publication: | Book / Working Paper |
Language: | English |
Notes: | Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments August 2017 erstellt |
Source: | ECONIS - Online Catalogue of the ZBW |
Persistent link: https://www.econbiz.de/10012949437