In this short note we give the concept of “funding markets” and “fund exchange processes” and show that the valuation of derivative products, including different means of funding, is analog to the valuation of multi-currency derivatives. Hence, modeling of different fundings is analog to...

By introducing a funding cost component like a funding valuation adjustment (FVA) into the valuation of derivatives, the replication strategy inherent in the valuation approach needs to be reflected in the real management of the position. Whilst in theory the replication takes place in one self...

Calculation of portfolio risk distributions, e.g. as used in the calculation of a "value at risk", may involve a huge number of valuations for every single financial product in a portfolio. The usual situation is that a distribution of market scenarios is given by a very large set (a sample) of...

Funding costs are the costs to a (risky) institution of providing and managing its future cash flows in excess of, say, some risk free funding. For a single deterministic cash flow with maturity T these costs are essentially given by the ratio of the risky bond and the risk free bond. They can...