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Quantitative Finance · Glossary

What is Funding valuation adjustment?

Definition 19.1 Rates, Credit, XVA and Risk · Chapter 19 — Funding, Margin and Capital Adjustments

The funding valuation adjustment (FVA) is the value of the cost of funding the collateral that uncollateralised trades and their hedges require, less the benefit of the collateral they release: FVA=FCA−FBA\mathrm{FVA} = \mathrm{FCA}-\mathrm{FBA}.

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