CSAs are not soley credit mitigating legal documentation. They define the core economic terms that govern how funding, capital, and counterparty credit risk are priced, transferred, and monetised between counterparties.

In practice, CSA terms determine discounting, funding costs, exposure profiles, and capital usage. They are therefore trading terms as much as counterparty risk management tools.

Where collateralisation is absent or asymmetric, dealers are required to warehouse exposure. This generates CVA, FVA, and capital costs, which are embedded into pricing - often opaquely, inconsistently, and with significant discretion.

Amending or introducing a CSA creates a clear economic opportunity:

• Release embedded XVA reserves
• Reduce ongoing pricing costs
• Restore genuine competitive tension between dealers

However, this value is not automatically realised. It must be explicitly identified, quantified, and negotiated.

We advise clients on how to do exactly that, drawing on direct experience negotiating CSAs from the dealer side, including negotiations that have released more than $50m of XVA.

The Structural Problem

In uncollateralised or one-way CSA structures, dealers are required to carry persistent exposure. This consumes balance sheet, generates CVA, FVA, and capital costs, and introduces funding volatility.

Those costs are passed through into pricing with discipline and consistency.

The release of those same costs, however, is not systematically returned to the client.

• Pricing remains opaque and model-dependent
• Economic benefits are fragmented across counterparties
• Outcomes depend on dealer-specific constraints rather than market levels

More importantly, the impact is not limited to legacy trades - it directly distorts pricing on new business.

When each incremental trade consumes balance sheet, dealers do not compete purely on market prices. Given the component from the XVAs, which is dealer specific, often dominates, the motivation to trade tight is lost leading to wider less responsive competitive pressure. For a detailed explanation of how one-way CSAs weaken dealer competition and distort pricing on new trades, see Why One-Way CSAs Destroy Pricing Pressure

The consequence is structural:

• Downside is transferred efficiently
• Upside is only partially shared
• New trades are priced with embedded inefficiency

Even sophisticated counterparties - including those advised by large consulting firms - typically realise only a fraction of the available economic benefit. In many cases, 30–40% capture is considered a good outcome, with the remainder retained by dealers.

Understanding the Drivers of Value

The value created by renegotiating a CSA is driven by:

• PFE Exposure profiles 
• CVA, FVA and KVA curves
• Capital rules (some of which are dealer-specific)
• Liquidity Rules (introducing LVA) 
• Collateral terms (Eligible Assets, Thresholds, MTAs) 
• Clearing vs Bilateral 
• Collectively→ Computing XVA Releases

These factors determine both:

• The absolute size of the economic opportunity
• How that value is distributed between client and dealer

CSA optimisation is therefore not a documentation exercise. It is a valuation, structuring, and negotiation problem across these dimensions.

Contingent Funding

One consideration for the signing of a CSA is Maintaining Contingent Funding  

Our Approach

Valuation of Reserve Release

We quantify the economic impact of CSA changes across CVA, FVA, and capital.

This produces a clear, actionable view of:

• Total value available
• Where that value sits across counterparties
• How it can be realised and monetised

The objective is not simply to estimate benefit, but to define a number that can be defended in negotiation and converted into outcome.

Negotiation Strategy and Execution

This is where value is won or lost. Dealers operate with structural advantages:

• Internal XVA models and assumptions
• Funding and capital frameworks that are not externally visible
• Significant discretion in how value is presented and shared

This market is inherently opaque. Without the ability to interrogate these inputs, clients are negotiating at an informational disadvantage.

We remove that disadvantage. We know how dealers price these effects, and how they should be priced. We are able to:

• Identify weak or inconsistent assumptions
• Challenge pricing constructively and credibly
• Reverse engineer methodologies where required
• Isolate where value is being retained rather than shared

Where unsupported arguments persist, we know how to deconstruct them and demonstrate their impact on pricing, creating a clear basis for escalation.

Our process introduces:

• Genuine competitive tension across counterparties
• Alignment on valuation methodology where required
• Transparency around where value is created and retained

The objective is not confrontation, but control of the process and the outcome.

Structuring CSA Terms

We design CSA terms to maximise economic benefit without introducing unnecessary operational or liquidity burden.

• Initial margin calibration
• Thresholds and MTAs
• Eligible collateral
• Downgrade and contingent provisions

The focus is on ensuring that the structure:

• Maximises XVA and funding efficiency
• Minimises avoidable balance sheet usage
• Remains practical to operate in real-world conditions

Operational Design and Implementation

Operational complexity is often overstated and frequently used as a reason to avoid change. In practice, it can be managed efficiently with the right design.

We support:

• Collateral management frameworks
• Valuation and dispute processes
• Cash and collateral workflows
• Custodian and tri-party structures

Where appropriate, we leverage dealer infrastructure or third-party providers to minimise internal build and accelerate implementation.

Why Our Experience Matters

XVA negotiations is an unusually opaque and specialist market. Experience on the inside matters. Outcomes are driven as much by behaviour and incentives as by theory.

Our team combines:

• Deep expertise in CVA and XVA pricing and structuring at the highest level
• Senior buy-side experience managing dealer relationships and extracting value across multiple counterparties
• Front-line rates trading experience, including frequent issuers and supranationals, with direct exposure to how CSA inefficiencies impact pricing, unwinds and execution

We have negotiated dozens of material CSAs (XVA release >$5m) and delivered XVA releases of as much as $50m+.

We have also regularly engaged opposite large consulting firms supporting clients in these processes. They bring structured frameworks and process discipline, but often lack direct exposure to how XVA is priced, transferred and defended within dealer organisations.

As a result:

• Certain assumptions are accepted rather than challenged
• Key areas of pricing discretion are not fully explored
• Negotiation leverage is not maximised

We understand where these gaps exist and how to address them.

We know:

• How dealers actually behave in negotiations
• Where value is created, hidden and lost
• How to convert theoretical benefit into realised outcomes

In a market where transparency is limited, having an experienced counterparty to the dealers materially changes the result.

Conclusion

CSA structure is one of the largest hidden drivers of derivatives pricing.

For many counterparties, substantial value already exists within their portfolios but is not realised due to pricing opacity and negotiation dynamics.

A structured approach to:

• Valuation
• Negotiation
• Implementation

can materially improve outcomes.

We combine technical expertise with real negotiation experience to ensure that value is not just identified, but captured.