Since the credit crisis the valuation of simple derivatives has become much more complex, primarily through so-called adjustments such as the credit value, debt value and funding value adjustment. Most of these elements of the valuation are well understood, although not always easily calculated....

Traditionally derivatives and other assets have been valued in isolation. The balance sheet of which a derivative position is part, was not included in the valuation. Recently, aspects of the valuation have been revised to incorporate certain elements of the balance sheet in the valuation....

The inclusion of funding costs in the valuation of derivatives resulting in the so-called funding valuation adjustment (FVA) is a topic of intense debate, model development, and research. One issue with standard formulations of FVA is that it is the same for liquid and illiquid assets. Even if...

This note considers the valuation of assets and liabilities on a balance sheet with liquidity risk. It introduces the multi-curve discounting (MCD) method, where the discount curve depends on the liquidity horizon of the asset. The difference between the value of an asset using OIS discounting...

This paper describes a model for the valuation of assets on a bank balance sheet with liquidity risk. The new feature of this model is that it explicitly incorporates the funding term of an asset. The inclusion of the funding term is important since it determines the expected liquidation loss....

Most of the assets on the balance sheet of a typical bank are illiquid. Therefore, liquidity risk is one of the key risks for banks. Since the risks of an asset affect its value, liquidity risk should be included in their valuation. Although models have been developed to include liquidity risk...

Traditionally derivatives have been valued in isolation. The balance sheet of which a derivative position is part, was not included in the valuation. Recently however, aspects of the valuation have been revised to incorporate certain elements of the balance sheet. Examples are the debt valuation...