Article
Capital in the quote, SA-CCR and KVA at the point of trading
For XVA desks and sales: lifetime capital is a real cost of a derivative. What SA-CCR and KVA at the point of trading require, why many desks price capital by rule of thumb, and what changes when it is in the quote.
Article, 5 pages, PDF. Sent on request, to a company email.
What it covers
- A derivative consumes capital for its whole life; KVA is the cost of holding it, and it belongs in the price
- SA-CCR exposure and the CVA charge are netting-set quantities, so the incremental capital of a trade depends on what it joins
- Pricing with capital needs the capital engine and the pricing engine to be the same engine
