In this paper we extend the existing literature on xVA along three directions. First, we enhance current BSDE-based xVA frameworks to include initial margin in presence of defaults. Next, we solve the consistency problem that arises when the front-office desk of the bank uses trade-specific discount curves (credit support annex discounting) which differ from the discount rate adopted by the xVA desk. Finally, we clarify the impact of aggregation of several subportfolios of trades on the xVA-valuation of the resulting global portfolio and study related nonlinearity effects.

A Unified Approach to xVA with CSA Discounting and Initial Margin / Biagini, Francesca; Gnoatto, Alessandro; Oliva, Immacolata. - In: SIAM JOURNAL ON FINANCIAL MATHEMATICS. - ISSN 1945-497X. - 12:3(2021), pp. 1013-1053. [10.1137/20M1332153]

A Unified Approach to xVA with CSA Discounting and Initial Margin

Immacolata Oliva
2021

Abstract

In this paper we extend the existing literature on xVA along three directions. First, we enhance current BSDE-based xVA frameworks to include initial margin in presence of defaults. Next, we solve the consistency problem that arises when the front-office desk of the bank uses trade-specific discount curves (credit support annex discounting) which differ from the discount rate adopted by the xVA desk. Finally, we clarify the impact of aggregation of several subportfolios of trades on the xVA-valuation of the resulting global portfolio and study related nonlinearity effects.
2021
CVA; DVA; FVA; CollVA; xVA; EPE; Basel III; collateral, initial margin
01 Pubblicazione su rivista::01a Articolo in rivista
A Unified Approach to xVA with CSA Discounting and Initial Margin / Biagini, Francesca; Gnoatto, Alessandro; Oliva, Immacolata. - In: SIAM JOURNAL ON FINANCIAL MATHEMATICS. - ISSN 1945-497X. - 12:3(2021), pp. 1013-1053. [10.1137/20M1332153]
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11573/1567632
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