Pricing counterparty credit risk, although being in the focus for almost
a decade by now, is far from being resolved. It is highly controversial if any valuation
adjustment besides the basic CVA should be taken into account, and if
so, for what purpose. Even today, the handling of CVA, DVA, FVA, ... differs
between the regulatory, the accounting, and the economic point of view. Eventually,
if an agreement is reached that CVA has to be taken into account, it remains
unclear if CVA can be modeled linearly, or if nonlinear models need to
be resorted to. Finally, industry practice and implementation differ in several aspects.
Hence, a unified theory and treatment of FVA and alike is not yet tangible.
The conference Challenges in Derivatives Markets, held at Technische Universitat¨
Munchen in March/April 2015, featured a panel discussion with panelists repre- ¨
senting different point of views: John Hull, who argues that FVA might not exist at all; in contrast to Christian Fries, who sees the need of all relevant costs to be
covered within valuation but not within adjustments. Damiano Brigo emphasizes
the nonlinearity of (most) valuation adjustments and is concerned about overlapping
adjustments and double-counting. Finally, Daniel Sommer puts the exit price
in the focus. The following (mildly edited) record of the panel discussion repeats the
main arguments of the discussants – ultimately culminating in the awareness that if
everybody charges an electricity bill valuation adjustment, it has to become part of
any quoted price.