FVA Is Concerned with

question 9

Multiple Choice

FVA is concerned with

• A) The cost of funding initial margin
• B) The cost of funding variation margin
• C) The cost of regulatory capital
• D) None of the above

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Definitions:

Excess Reserves

Funds that banks hold over and above the legal reserve requirements set by central banking authorities.

Reserve Requirement

This is a monetary policy tool used by central banks, specifying the minimum amount of reserves a bank must hold against its deposits. It influences how much money a bank can lend and thus helps control money supply and inflation.

Excess Reserves

The funds that commercial banks hold in their reserves over and above the regulatory requirement set by the central bank.

Reserve Ratio

The fraction of deposits that a bank is required to hold in reserve and not loan out, as mandated by central banking authorities.