Fixed Income Pricing and XVA

Overview


The XVA framework views that price of a fixed income instrument as a risk free price minus a series of adjustments that represent risks or other costs that detract from its value.
{% Value = VND - XVA %}
Here {% VND %} is the value of the bond with no default, and {% XVA %} is represented as the sum of the following factors.

  • CVA - credit value adjustment
  • LVA - liquidity value adjustment
  • TVA - taxation value adjustment