In this article we expand the semi-replication framework by Burgard and Kjaer to derivative books with multiple counterparties. We then find the funding strategy that corresponds to the recent funding value adjustment accounting proposal by Albanese and Andersen. This strategy is asymmetric and...

The economic value of derivatives depends on the funding costs encountered by the issuer. In this paper we derive general relations between the costs of running specific funding strategies while the issuer is alive and the resulting windfalls or shortfalls upon the issuer default. This gives...

In a recent paper John Hull and Alan White have argued that funding cost adjustments should not be included in derivatives pricing, which has triggered a heated debate. Their arguments share some ideas that we have published previously and the purpose of this note is intended to help clarify...

The claim on a derivative contract upon default of one of the counterparties depends on the way the close-out amount is determined. Whether or not this close-out amount includes the cost of funding affects the CVA and FVA. We specify how to calculate CVA and FVA under different funding cost...

Funding costs and counterparty credit risk adjustments have become increasingly important contributions to the total value of derivatives positions. Based on a recently developed derivatives pricing framework that incorporates these two effects in a unified way, we discuss the relationship of...

We derive a partial differential equation (PDE) representation for the value of financial derivatives with bilateral counterparty risk and funding costs. The model is very general in that the funding rate may be different for lending and borrowing and the mark-to-market value at default can be...

We extend the single period structural model from Kjaer \cite{mk2017c} to continuous time. The resulting valuation adjustment formulas look as expected and are to be evaluated under a dealer financing probability measure. We also show what it means to hedge the capital valuation adjustment

Understanding the interaction between a new derivative, its financing and the wider balance sheet during pricing is critical for dealer profitability. For this purpose we extend a single period structural balance sheet model developed in Andersen, Duffie and Song to include equity financing...

We present a consistent framework for computing shareholder and firm values of derivative portfolios in the presence of collateral, counterparty risk and funding costs in a multi-currency economy. The results extend the single currency economy results from Kjaer and the major difference is that...

We present a consistent framework for computing shareholder and firm values of derivative portfolios in the presence of collateral, counterparty risk and funding costs in a single currency economy with stochastic interest rates and spot assets with local volatility. The follow-up paper Kjaer...