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Course Calendar Course Calendar

Valuation Adjustments: The XVA Challenge

Day One

Basics and CCR


  • Overview and historical background
  • The impact of regulation and accounting
  • The importance of capital and funding costs
  • What is xVA?

Counterparty credit risk

  • Credit exposure
  • Credit limits and PFE
  • EFV, EPE and ENE
  • Incremental and marginal exposure

Example: PFE example

Mitigating Counterparty Risk

  • Netting and compression
  • Resets and ATEs
  • Collateral
  • Initial margin
  • Central counterparties

Example: Compression example

Day Two

Collateral, Exposure and CVA

Collateral and discounting

  • Variation margin and collateral discounting
  • Cheapest-to-deliver valuation
  • Discounting to ColVA
  • Funding and discounting

Example: ColVA calculation

Exposure simulation

  • Challenges of exposure simulation
  • Models and calibration for each asset class
  • Proxies and correlations
  • Implementation with Monte Carlo
  • Modelling resets and collateral

Example: FX forward and IRS simulation


  • Proxy spread approaches
  • CVA formulas
  • Impact of collateral on CVA
  • Wrong-way risk
  • Bilateral CVA

Example: CVA/DVA calculation

Day Three

Funding and Capital

Funding and FVA

  • NSFR and LCR and IBOR replacement
  • FVA formula and link to discounting approach
  • Capturing one-way CSAs
  • CVA/DVA/FVA framework
  • Asymmetric FVA

Example: FVA calculation

Managing and Hedging xVA

  • Bank approaches to hedging xVA
  • xVA greeks
  • Hedging instruments
  • P&L explained
  • Proxy hedging

Example: xVA hedging simulations

Regulatory capital requirements

  • Counterparty risk capital requirements
  • Cleared vs. non cleared capital requirements
  • Review of capital methodologies
  • SA-CCR
  • The leverage ratio

Example: SA-CCR vs. IMM

Day Four

KVA and Initial Margin

Capital and KVA

  • Return on capital in banks
  • Capital value adjustment (KVA)
  • KVA management strategies
  • Initial margin in SA-CCR and IMM approaches
  • FRTB and BA-CVA / SA-CVA

Example: KVA calculation

Initial Margin and MVA

  • Bilateral margin rules
  • CCP initial margin methodologies
  • The ISDA SIMM™
  • MVA
  • Initial margin optimisation

Example: SIMM and MVA calculations

Recap and advanced topics

  • Overlaps and portfolio effects
  • xVA examples under different CSAs
  • xVA optimisation
  • Wrong-way risk
  • Asymmetric FVA
  • Approach to capital and KVA

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