This paper from KPMG International looks at Funding Valuation Adjustments (FVA) and offers nine propositions on some of the key areas being discussed.
As well as valuation, the paper touches on aspects of accounting, regulatory capital and an institution's internal liquidity management.
- There are unprecedented changes to the discounting rates used to value collateralised derivatives (OIS).
- Methods used to reflect counterparty credit (CVA) and own credit (DVA) are also experiencing changes.
- The latest and most complicated potential change which is now looming is funding valuation adjustment (FVA).
- A fundamental change in the approach to the valuation of uncollateralised derivatives.