The XVA State of Play: Its Transformative Impacts

Discussions about XVAs half a decade ago were nothing like they are today. Financial industry practitioners are paying a lot more attention to the pricing, valuation and risk management of their derivatives transactions.

New regulations and the emergence of new XVAs, such as KVA and MVA, are requiring enhanced governance and more powerful computational capabilities. They are also requiring a change in market practices. For example, when it comes to valuations, banks can no longer ignore the impacts of counterparty credit risk, funding and regulatory capital.

This white paper explores a range of XVA topics, including the evolving use of valuation adjustments, the challenges herein, the structure of XVA desks, and other themes.