Numerous sources refer to the 'funding cost' of a derivative.
I'm confused as to exactly what cost is being referred to here. To illustrate my confusion, consider purchasing an uncollateralised OTC gold forward at market (with value of 0). I have not needed to fund anything. Now consider that forward going into the money with some positive PV. I still have not funded anything (and will not need to fund anything), and I will collect my payout at maturity. Similarly instead consider that forward going out of the money with some negative PV. I will not have to fund anything (and will not need to fund anything), and I will pay my counterpart at maturity.
Some of the aforementioned references to 'funding costs':
We agree that in the case of a receivable, there is a funding cost C, and in the case of a payable, there is a funding benefit B https://quant.stackexchange.com/a/71965/
FVA attempts to capture the cost of funding uncollateralised OTC derivatives.
... Similarly, a funding cost arises for the bank when a derivative has a positive market value. The purchase of an ‘in the money’ or asset position derivative requires the bank to pay cash. The incremental cost of funding this purchase can also be seen as equivalent to the cost of the bank raising funding https://www.pwc.com.au/pdf/xva-explained.pdf
(note that my hypothetical is different to this PWC scenario since the derivative was 'purchased' at zero cost, whereas the PWC scenario considers purchasing an ITM derivative).
This article does not cover the cost of funding derivatives positions https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/bank-funding-costs-what-are-they-what-determines-them-and-why-do-they-matter.pdf
Traders want to incorporate a funding value adjustment (FVA) in valuations to reflect the funding costs https://www.researchgate.net/publication/256057127_Valuing_Derivatives_Funding_Value_Adjustments_and_Fair_Value