A Bond Consistent Derivative Fair Value

Alberto Fern\'andez Mu\~noz de Morales; Johan Gunnesson

RECORD

A Bond Consistent Derivative Fair Value

Johan Gunnesson, Alberto Fernández Muñoz de Morales

Pricing of Securities · Submitted 22 Jun 2014

abstract compiled · 2026-09-23 · no language-model review

The authors' main claim In this paper we present a rigorously motivated pricing equation for derivatives, including general cash collateralization schemes, which is consistent with quoted market bond prices.

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The paper's own sentences, arranged. Each label is drawn from a closed vocabulary; the number beside it is the probability the classifier gave that label. Numbers in the tables are the authors', checked by code. No sentence in this record was written by a model.

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Compiled by classifier-1.13-20260917 via OpenRouter, question bank abstract-p1-20260923, 2026-09-23: 1 request, 4,365 input tokens, $0.0002 reported.

What the abstract itself states, as probabilities: claims first 0.10 · states limitation 0.28 · human participants 0.02 · controlled comparison 0.11 · randomized assignment 0.01 · states quantitative result 0.04 · compares with prior results 0.96 · mentions code or data availability 0.02.

The abstract, sentence by sentence

arXiv listing abstract v2. Results and the main claim are underlined; show every role.

In this paper we present a rigorously motivated pricing equation for derivatives, including general cash collateralization schemes, which is consistent with quoted market bond prices. Traditionally, there have been differences in how instruments with similar cash flow structures have been priced if their definition falls under that of a financial derivative versus if they correspond to bonds, leading to possibilities such as funding through derivatives transactions. Furthermore, the problem has not been solved with the recent introduction of Funding Valuation Adjustments in derivatives pricing, and in some cases has even been made worse. In contrast, our proposed equation is not only consistent with fixed income assets and liabilities, but is also symmetric, implying a well-defined exit price, independent of the entity performing the valuation. Also, we provide some practical proxies, such as first-order approximations or basing calculations of CVA and DVA on bond curves, rather than Credit Default Swaps.

background contribution method result interpretation main claim

What the classifier reports for each sentence. The number is the probability it gave the label.
#	sentence	role	the authors' own work	states the main conclusion	strength
s0	In this paper we present a rigorously motivated pricing equation for derivatives, including general cash collateralization schemes, which is consistent with quoted market bond prices.	contribution 1.00	0.95	0.76	asserted 0.92
s1	Traditionally, there have been differences in how instruments with similar cash flow structures have been priced if their definition falls under that of a financial derivative versus if they correspond to bonds, leading to possibilities such as funding through derivatives transactions.	background 0.98	0.04	0.03	asserted 0.63
s2	Furthermore, the problem has not been solved with the recent introduction of Funding Valuation Adjustments in derivatives pricing, and in some cases has even been made worse.	gap 0.76	0.06	0.04	asserted 0.91
s3	In contrast, our proposed equation is not only consistent with fixed income assets and liabilities, but is also symmetric, implying a well-defined exit price, independent of the entity performing the valuation.	contribution 0.63	0.92	0.54	asserted 1.00
s4	Also, we provide some practical proxies, such as first-order approximations or basing calculations of CVA and DVA on bond curves, rather than Credit Default Swaps.	contribution 0.63	0.90	0.05	asserted 0.99

What kind of paper the classifier reports this is: theoretical result 0.88 · evidence from proof or derivation 0.97.

What was examined, and what was not

sources read

arXiv listing abstract v2

not examined

full text
figures and tables
references and citing sentences
relations to other papers

levels run

P abstract

not run

S sections
T body sentences
C citations
R cross-paper relations

Every quoted sentence on this record is the authors'. Every label is from Pith's closed vocabulary, with the probability shown beside it. Every number in the measurements table is the authors', checked by code. Record as JSON

The paper

Original abstract

In this paper we present a rigorously motivated pricing equation for derivatives, including general cash collateralization schemes, which is consistent with quoted market bond prices. Traditionally, there have been differences in how instruments with similar cash flow structures have been priced if their definition falls under that of a financial derivative versus if they correspond to bonds, leading to possibilities such as funding through derivatives transactions. Furthermore, the problem has not been solved with the recent introduction of Funding Valuation Adjustments in derivatives pricing, and in some cases has even been made worse. In contrast, our proposed equation is not only consistent with fixed income assets and liabilities, but is also symmetric, implying a well-defined exit price, independent of the entity performing the valuation. Also, we provide some practical proxies, such as first-order approximations or basing calculations of CVA and DVA on bond curves, rather than Credit Default Swaps.

Human review

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How the literature uses it

1 arXiv paper cite this in 3 sentences

Each citing sentence is taken from the citing paper's LaTeX source and typed by Pith's classifier. A label appears at probability 0.8 or more (0.95 for support), a contest at 0.7 or more; the quoted words are the citing authors'. How each label was checked · JSON

What it cites · 10 sentences without a confident label

Builds on 1 paper

To do so, we will study a derivatives transaction and its replication building upon the setup described in [ref] and [ref] , but with the important new ingredient being the adoption of the Credit- and Debit Constraints [ref] and [ref], respectively, which enforce the consistency of derivative- and bond valuations.

Recovering from Derivatives Funding: A consistent approach to DVA, FVA and Hedging · A formal derivation of the pricing formula · 0.96

Compares with 1 paper

Such a dependence was first proposed in [ref] , and in [ref] we arrived at a similar result by different means, although we do not believe that the accounting mismatch is irreconcilable.

Recovering from Derivatives Funding: A consistent approach to DVA, FVA and Hedging · Incorporating own bond-CDS basis · 0.89

Cites as support 1 paper

But this component does exist and, as shown in [ref] , has a well-defined value even for the institution considered as a going concern.

Recovering from Derivatives Funding: A consistent approach to DVA, FVA and Hedging · A formal derivation of the pricing formula · 0.99

Cites as background 3 papers

For an example of the treatment of collateralization in a funding framework, see [ref] .

Funding Valuation Adjustment: a consistent framework including CVA, DVA, collateral,netting rules and re-hypothecation · Partially Collateralized Derivatives · 0.90
For an example of the treatment of collateralization in a funding framework, see [ref] .

Funding, Collateral and Hedging: uncovering the mechanics and the subtleties of funding valuation adjustments · Partially Collateralized Derivatives · 0.90
For a technical account of these subjects see [ref] , or the textbooks [ref] .

Bilateral counterparty risk valuation for interest-rate products: impact of volatilities and correlations · Introduction and Final Pricing Formula · 1.00

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