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Funding Valuation Adjustment: A Consistent Framework Including CVA, DVA, Collateral, Netting Rules and Re-Hypothecation
In this paper we describe how to include funding and margining costs into a risk-neutral pricing framework for counter-party credit risk. We consider realistic settings and we include in our models the common market practices suggested by the ISDA documentation without assuming restrictive constraints on margining procedures and close-out netting …