The xVA Challenge: Counterparty Risk, Funding, Collateral, Capital and Initial Margin, 4th Edition - Hardcover

Gregory, Jon

Hardcover

ISBN 10: 1119508975 ISBN 13: 9781119508977

Publisher: Wiley, 2020

Synopsis

A thoroughly updated and expanded edition of the xVA challenge

The period since the global financial crisis has seen a major re-appraisal of derivatives valuation, generally expressed in the form of valuation adjustments (‘xVAs’). The quantification of xVA is now seen as fundamental to derivatives pricing and valuation. The xVA topic has been complicated and further broadened by accounting standards and regulation. All users of derivatives need to have a good understanding of the implications of xVA. The pricing and valuation of the different xVA terms has become a much studied topic and many aspects are in constant debate both in industry and academia.

• Discussing counterparty credit risk in detail, including the many risk mitigants, and how this leads to the different xVA terms
• Explains why banks have undertaken a dramatic reappraisal of the assumptions they make when pricing, valuing and managing derivatives
• Covers what the industry generally means by xVA and how it is used by banks, financial institutions and end-users of derivatives
• Explains all of the underlying regulatory capital (e.g. SA-CCR, SA-CVA) and liquidity requirements (NSFR and LCR) and their impact on xVA
• Underscores why banks have realised the significant impact that funding costs, collateral effects and capital charges have on valuation
• Explains how the evolution of accounting standards to cover CVA, DVA, FVA and potentially other valuation adjustments
• Explains all of the valuation adjustments – CVA, DVA, FVA, ColVA, MVA and KVA – in detail and how they fit together
• Covers quantification of xVA terms by discussing modelling and implementation aspects.

Taking into account the nature of the underlying market dynamics and new regulatory environment, this book brings readers up to speed on the latest developments on the topic.

About this title

About the Author

JON GREGORY, PHD, is an independent expert specialising in counterparty risk and related aspects. He has worked on many aspects of credit risk in his career, being previously with Barclays Capital, BNP Paribas and Citigroup. He is a senior advisor for Solum Financial Derivatives Advisory and is a faculty member for the Certificate of Quantitative Finance (CQF). Jon has a PhD from Cambridge University.

From the Back Cover

Praise for The xVA Challenge

"The issue of counterparty risk has undergone rapid change since the credit crisis. All end users of OTC derivatives are affected by these changes. The title 'xVA' reflects the increased complexity generated by these changes. Jon Gregory provides the reader with a comprehensive, yet readable, discourse on the different facets of counterparty risk. This book is an essential reading for regulators and all users of OTC derivatives."
Stuart M. Turnbull, Bauer Chaired Professor of Finance, Bauer College of Business, University of Houston

"Jon Gregory is one of the godfathers of the VA story. He is amongst the few who can demystify the puzzle and this book is a key tool for bringing light into these dark matters."
Wim Schoutens, Independent consultant; Professor in financial engineering, University of Leuven, Belgium

"This is by far the clearest and most comprehensive reference work on counterparty credit risk and related value adjustments. With this new edition, Jon Gregory explains the latest changes in market practice, along with critical expert commentary."
Darrell Duffie, Dean Witter Distinguished Professor of Finance, Stanford Graduate School of Business

"The previous editions of Jon Gregory's books on the post-crisis over-the-counter derivatives markets were classics, packed with a wealth of information. This new edition greatly extends the coverage of the first three editions. Like them, it is a must-buy for anyone involved with derivatives markets. Congratulations Jon on another excellent book."
John Hull, Maple Financial Group Chair in Derivatives and Risk Management - Rotman School of Management, University of Toronto

From the Inside Flap

A thoroughly updated and expanded edition of the xVA challenge

The period since the global financial crisis has seen a major re-appraisal of derivatives valuation, generally expressed in the form of valuation adjustments ('xVAs'). The quantification of xVA is now seen as fundamental to derivatives pricing and valuation. The xVA topic has been complicated and further broadened by accounting standards and regulation. All users of derivatives need to have a good understanding of the implications of xVA. The pricing and valuation of the different xVA terms has become a much studied topic and many aspects are in constant debate both in industry and academia. The xVA Challenge:

• Discusses counterparty credit risk in detail, including the many risk mitigants, and how this leads to the different xVA terms
• Explains why banks have undertaken a dramatic reappraisal of the assumptions they make when pricing, valuing and managing derivatives
• Covers what the industry generally means by xVA and how it is used by banks, financial institutions and end users of derivatives
• Explains all of the underlying regulatory capital (e.g. SA-CCR, SA-CVA) and liquidity requirements (NSFR and LCR) and their impact on xVA
• Underscores why banks have realised the significant impact that funding costs, collateral effects and capital charges have on valuation
• Explains all of the valuation adjustments CVA, DVA, FVA, ColVA, MVA and KVA in detail and how they fit together
• Explains the evolution of accounting standards will cover CVA, DVA, FVA and potentially other valuation adjustments
• Covers quantification of xVA terms by discussing modelling and implementation aspects.

Taking into account the nature of the underlying market dynamics and new regulatory environment, this book brings readers up to speed on the latest developments on the topic.

Edition details

• Publisher: Wiley
• Publication date: 2020
• Language: English
• ISBN 10: 1119508975
• ISBN 13: 9781119508977
• Binding: Hardcover
• Edition number: 4
• Number of pages: 704