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  • Details
    • Service: Advisory, Financial Risk Management, Risk Consulting
    Industry: Financial Services
    Type: Business and industry issue
    Date: 12/13/2011
    Ukraine - Issues and insights - Articles and Publications

    New valuation and pricing approaches for derivatives in the wake of the financial crisis 

    In the wake of the financial crisis, banks need to rethink their pricing, valuation and transfer pricing. The ‘old’ derivatives valuation framework with one master swap curve for discounting and projection of forward rates no longer applies. In particular, the crisis revealed differences in value between collateralized and uncollateralized trades, which were negligible before.
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    The relevance of CSA and funding related valuations originates from fundamental changes in the markets since the beginning of the financial crisis. As a result of high regulatory pressure to move to central clearing, and the adoption of CSA discounting by central clearing services, this underpins a fundamental shift in favor of this approach.


    This report takes an in-depth look at the findings of the KPMG industry survey on CSA and funding cost related discounting, as well as the transfer pricing and risk management issue arising from the transition to the new discounting regime. The results show that CSA discounting has become the market standard for pricing collateralized deals, and will become the market standard for valuation at trade level.