Funding Valuation Adjustment At A Glance

Capabilities and Services

Since the 2008 financial crisis, an increasing number of derivative trades have been collateralized. The collateral payments usually earn interest, paid to the owner of the collateral, at a rate that is often perceived to be a risk free rate, such as the overnight index swap (OIS) rate in the US.

There are still transactions that are not fully collateralized. In these situations, the cash flows associated with the uncollateralized derivative trade may be different than the cash flows that would arise under a fully collateralized trade. Given the potentially different cash flows, some market participants have chosen to recognize a difference in the economic value between a collateralized and an uncollateralized trade with a term known as the Funding Valuation Adjustment (FVA).

NERA is well-positioned to assist clients in a wide range of disputes relating to financial issues. Our experts have extensive experience valuing and analyzing a variety of asset classes, including fixed income securities, structured products, and other complex derivatives. NERA's securities experts have been involved in numerous disputes in a wide range of venues and can assist at many stages of a matter.