Funding Valuation Adjustment

The seminar will cover the theoretical basis that underpins calculating FVA.

Business, Management

Funding Valuation Adjustment 16 May 2014 Downtown Conference Center New York, New York, United States
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Funding valuation adjustment (FVA) is the cost of borrowing to fund collateral to post on hedges to derivative transactions. Banks are calculating FVA for OTC books, but the debate surrounding its significance is far from over and key questions still remain open. How should one compute the FVA? How should the FVA appear in accounts? How to reduce the FVA?

When John Hull and Alan White published their article on the FVA debate in the 25th anniversary edition of Risk, no one predicted the level of feedback and debate it would generate. Hull and White's argument suggests that trading desks should not charge a funding valuation adjustment to cover costs incurred on uncollateralised trades. For traders, this is simply not market procedure. The search continues for a way to reconcile theory and practice.

With so much uncertainty surrounding FVA this timely seminar will provide a forum for practitioners to gather together and debate key issues. The seminar will cover the theoretical basis that underpins calculating FVA. In addition, experienced professionals will provide expert views on the FVA debate as it stands today, the interaction between FVA and other metrics (wrong way risk, DVA) and a panel discussion will consider where responsibility for FVA should sit in regard to CVA.

Course Highlights:

- Panel discussion debating CVA desk and Treasury views of FVA
- FVA and cost of hedging
- The impact of the FVA at portfolio level and across the capital structure of the bank
- How is the FVA defined and how to compute it
- Is there double-counting between FVA and DVA / CVA?
- Emerging accounting standards for the FVA
- Internal auditing process for the FVA
- FVA optimisation and collateral trading strategies

Functions who should attend:

Derivatives Trading, CVA Trading, Derivatives Operations, Derivatives Documentation, Derivatives Valuation/Pricing Models, Directors, Fixed Income, Collateral Management, Quantitative Analysis, Risk Management