Arbitrage-free XVA

作者：Bichuch Maxim; Capponi Agostino^*; Sturm Stephan

来源：Mathematical Finance, 2018, 28(2): 582-620.

DOI：10.1111/mafi.12146

• arbitrage-free valuation
• backward stochastic differential equations
• counterparty credit risk
• funding spreads
• XVA

We develop a framework for computing the total valuation adjustment (XVA) of a European claim accounting for funding costs, counterparty credit risk, and collateralization. Based on no-arbitrage arguments, we derive backward stochastic differential equations associated with the replicating portfolios of long and short positions in the claim. This leads to the definition of buyer's and seller's XVA, which in turn identify a no-arbitrage interval. In the case that borrowing and lending rates coincide, we provide a fully explicit expression for the unique XVA, expressed as a percentage of the price of the traded claim, and for the corresponding replication strategies. In the general case of asymmetric funding, repo, and collateral rates, we study the semilinear partial differential equations characterizing buyer's and seller's XVA and show the existence of a unique classical solution to it. To illustrate our results, we conduct a numerical study demonstrating how funding costs, repo rates, and counterparty risk contribute to determine the total valuation adjustment.

• 出版日期2018-4