Funded Bilateral Valuation AdjustmentReport as inadecuate



 Funded Bilateral Valuation Adjustment


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We show how the cost of funding the collateral in a particular set up can be equal to the Bilateral Valuation Adjustment with the -funded- probability of default, leading to the definition of a Funded Bilateral Valuation Adjustment (FBVA). That set up can also be viewed by an investor as an effective way to restructure the counterparty risk arising from an uncollateralized transaction with a counterparty, mitigating or even avoiding entirely the additional capital charge introduced by the new Basel III framework.



Author: Lorenzo Giada; Claudio Nordio

Source: https://archive.org/







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