Corrected XVA Modelling Framework and Formulae for KVA and MVA
Pricing of Securities
2018-07-31 v1
Abstract
We discuss and clarify the XVA modelling framework specified in the paper "MVA by replication and regression" (Risk Magazine, May 2015) for including bilateral credit risk and funding costs in derivative pricing, and in doing so we rectify two key errors in the valuation adjustments accounting for costs of capital and initial margin, and present corrected formulae for KVA and MVA.
Cite
@article{arxiv.1807.10924,
title = {Corrected XVA Modelling Framework and Formulae for KVA and MVA},
author = {Antti Vauhkonen},
journal= {arXiv preprint arXiv:1807.10924},
year = {2018}
}
Comments
6 pages