A unified approach to xVA with CSA discounting and initial margin

27 May 2019  ·  Francesca Biagini, Alessandro Gnoatto, Immacolata Oliva ·

In this paper we extend the existing literature on xVA along three directions. First, we enhance current BSDE-based xVA frameworks to include initial margin in presence of defaults... Next, we solve the consistency problem that arises when the front-office desk of the bank uses trade-specific discount curves (CSA discounting) which differ from the discount rate adopted by the xVA desk. Finally, we clarify the impact of aggregation of several sub-portfolios of trades on the xVA-valuation of the resulting global portfolio and study related non-linearity effects. read more

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