Do I need to discount using the OIS curve?
Then add some sort of FVA adjustment over and above the CVA/DVA? How do I work out a banks cost of funding?
Any help would be greatly appreciated.
Quantitative Finance Stack Exchange is a question and answer site for finance professionals and academics. It only takes a minute to sign up.Sign up to join this community
An uncollateralized swap transaction should be valued at its own funding rate, which in practice means the bank unsecured funding rate, for instance approximated as 3M Libor. Alternatively use the OIS curve for the base valuation and mark the difference between 3M Libor discounting and OIS discounting as FVA.