Overnight Index Swap (OIS) discounting and Funding Valuation Adjustment (FVA) have been hot topics in the Over-the-Counter (OTC) derivatives market since the global financial crisis. While practitioners generally agree that fully collateralized trades should be discounted at the rate paid on the collateral, meaning cash-collateralized trades are discounted using overnight rates instead of LIBOR, there is less agreement on exactly how to price partially collateralized or uncollateralized trades and how to include a funding charge in the price to reflect a firm’s true cost of funding. Moreover, optionality embedded in Credit Support Annexes (CSAs) can make the pricing exercise even more complicated.

In this webinar, recorded on Wednesday, June 19, 2013, featured speaker Dr. Tom Davis, Vice President of the Client Solutions Group, discussed the fundamentals of OIS discounting and Funding Value Adjustment for OTC derivatives and delved into the relationship between the two concepts.

Dr. Davis discussed:

  • Collateral discounting and OIS

  • Credit Support Annex

    • Utopian CSA

    • Real world CSA

  • A Primer on Funding Value Adjustment

    • Why has this come to the forefront?

    • FVA definition

  • Intuitive FVA

  • Case Study

    • At-the-Money, In-the-Money, and Out-of-the-Money swaps

  • How do you pass on this charge?

  • Conclusions

To view the on-demand webinar, just register on the right side of this page.

Featured Numerix Speakers:
Tom Davis, PhD, VP Client Solutions Group, Numerix and Product Manager, Risk
Dr. Davis is the product manager for Numerix’s flagship analytics library, CrossAsset, collaborating with research, development, and sales teams to help develop Numerix’s industry-leading derivative pricing and risk solutions. Prior to Numerix, he worked as a quantitative analyst for four years, working on pricing interest rate and foreign exchange hybrid products. Dr. Davis obtained a PhD in theoretical physics from the University of British Columbia in Vancouver, Canada.

Moderator: Jim Jockle, Chief Marketing Officer
Mr. Jockle leads the company's global marketing efforts, spanning a diverse set of solutions and audiences. He oversees integrated marketing communications to customers in the largest global financial markets and to the Numerix partner network through the company's branding, electronic marketing, research, events, public relations, advertising and relationship marketing.

Prior to joining Numerix, he served as Managing Director of Global Marketing and Communications for Fitch Ratings. During his tenure at Fitch, Mr. Jockle built the firm’s public relations program, oversaw investor relations and led marketing and communications plans for several acquisitions. He also oversaw the brand development of a new company dedicated to the enhancement of credit derivative and structured-credit ratings, products and services. Prior to Fitch, Mr. Jockle was a member of the communications team at Moody's Investors Service.

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