For hedge funds, asset managers, or corporates with uncollateralised derivative exposure, significant latent value is often hidden in how banks manage their CVA reserves and Initial Margin (IM) requirements. A centralised XVA Hub can systematically identify and recover this value by managing exposures across all counterparties, rather than trade by trade.

CVA “mining” arises because each dealer calibrates its credit reserves to its own exposure and counterparty profile. Where a buy-side participant holds offsetting exposures across several dealers, these reserves can be rebalanced to reduce overall CVA charges and associated funding costs.

The same logic applies to IM optimisation under the Non-Cleared Margin Rules (NCMR). Because the $50 million uncollateralised threshold applies per counterparty group, not in aggregate, redistributing trades across multiple dealers can materially reduce total IM. With funding costs at 5%, spreading exposure evenly across five dealers could save roughly $12.5 million per year (5 × $50 million × 5%).

Further gains can be achieved by transforming cleared exposures into bilateral ones using swaptions that replicate the delta of cleared swaps. These bilateral structures allow negotiated and offset IM, effectively creating free funding for part of the portfolio.

Several large hedge funds now operate centralised hubs that manage their XVA footprint across all dealer relationships. For smaller or less systemically connected institutions, adopting a similar framework can yield recurring savings and greater transparency over balance-sheet usage.