NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
loading...

Leif Andersen

Bank of America Merrill Lynch
One Bryant Park
New York, NY 10036

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: Bank of America Merrill Lynch

NBER Working Papers and Publications

August 2017Funding Value Adjustments
with Darrell Duffie, Yang Song: w23680
We demonstrate that the funding value adjustments (FVAs) of major dealers are debt-overhang costs to their shareholders. In order to maximize shareholder value, dealer quotations therefore adjust for FVAs. Our case examples include interest-rate swap FVAs and violations of covered interest parity. Contrary to current valuation practice, FVAs are not themselves components of the market values of the positions being financed. Current dealer practice does, however, align incentives between trading desks and shareholders. We also establish a pecking order for preferred asset financing strategies and provide a new interpretation of the standard debit value adjustment (DVA).

Published: LEIF ANDERSEN & DARRELL DUFFIE & YANG SONG, 2019. "Funding Value Adjustments," The Journal of Finance, vol 74(1), pages 145-192.

 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us