In this paper we study how to include funding costs into the pricing of interest rate swaps and we show how they affect the value of the swap via a Funding Value Adjustment (FVA), in analogy with the Credit Value Adjustment (CVA) and the DVA. We consider the pricing of swap contracts with no...

In this work we try and clarify what is the essence of the DVA: we believe we offer a robust conceptual framework to consistently included the DVA in the balance sheet of a financial institutions. Under this perspective, to our knowledge never proposed before, the DVA does not manifest any...

On January 29th, 1997, an historical date for the U.S. Treasury, the first inflation-indexed Treasury notes, for a nominal value of 7 billion of dollars, have been auctioned. These securities are also called Tips (Treasury inflation-protected securities). Subsequently, the Chicago Board of Trade...

In this paper we try and complete the analysis conducted in Castagna (2012) by investigating the valuation of collateralized derivative contracts when more than one currency are involved. This can happen for three reasons:1. The contract's pay-off is denominated in some currency YYY but...

A recent paper by Professors Hull and White argues that the Funding Value Adjustment is not a cost for the derivative desks. They suggest that the correct discounting rate is always the risk-free rate, thus excluding any possible accounting for the actual funding rate paid by the bank. Their...