As driven by regulators in the post-crisis environment, managing counterparty credit risk is paramount to today’s market practitioners, taking on a center stage of its own. In addition to CVA and DVA, another acronym has been added to the list for debate—FVA, the Funding Value Adjustment. Much like CVA and DVA, FVA is generating much heated discussion, analysis and debate.

Most of this debate centers around whether a funding adjustment is appropriate for derivative prices. Some argue that FVA is an integral component of OTC derivatives pricing, while others make the case that FVA is not necessary and in violation of fundamental asset pricing theory, also asserting that the impact of FVA can be largely negated by an offsetting impact of DVA.

On November 13, 2012 featured speaker Sanket Patel, Product Specialist, examined and dissected these elements, along with other salient aspects of the ongoing FVA debate.

In this webinar, we explored Professor John Hull and Alan White’s arguments, as well as various opposing viewpoints, taking a look at the potential impact of these arguments, using specific case study examples.

Mr. Patel covered the following key topics in the webinar:

  • Setting the stage: A Review of CVA and DVA

  • A Look at the Increasing Cost of Funding Post-Crisis

  • Overview of FVA

  • FVA as the Cost of Hedging

  • The FVA Debate: Dissecting Each Side of the Debate

  • Hull and White’s Point of View and The Tale of Two DVAs

  • Defending FVA: An Illustrative Example

To view the webinar replay, just register on the right side of this page.

Featured Numerix Speakers:

Sanket Patel, Product Specialist, Numerix
Mr. Patel, as a member of the product management team, focuses on researching and identifying market trends/practices and translating them into features, both from a business and technical perspective. Leveraging this technical background, he also works with clients to help them understand how the Numerix family of products can best be used to solve business problems. Prior to Numerix, Mr. Patel worked as a research assistant at Florida State University where he focused largely on researching statistical arbitrage and data mining. Mr. Patel holds a Masters in Financial Engineering from Baruch College.

Moderator: Jim Jockle, Chief Marketing Officer
Mr. Jockle leads the company's global marketing efforts, spanning a diverse set of solutions and audiences. He oversees integrated marketing communications to customers in the largest global financial markets and to the Numerix partner network through the company's branding, electronic marketing, research, events, public relations, advertising and relationship marketing.

Prior to joining Numerix, he served as Managing Director of Global Marketing and Communications for Fitch Ratings. During his tenure at Fitch, Mr. Jockle built the firm’s public relations program, oversaw investor relations and led marketing and communications plans for several acquisitions. He also oversaw the brand development of a new company dedicated to the enhancement of credit derivative and structured-credit ratings, products and services. Prior to Fitch, Mr. Jockle was a member of the communications team at Moody's Investors Service.

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FVA in Practice – Taking Classical Theory Further