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We present a dialogue on Funding Costs and Counterparty Credit Risk modeling,inclusive of collateral, wrong way risk, gap risk and possible Central Clearingimplementation through CCPs. This framework is important following the factthat derivatives valuation and risk analysis has moved from exotic derivativesmanaged on simple single asset classes to simple derivatives embedding the newor previously neglected types of complex and interconnected nonlinear risks weaddress here. This dialogue is the continuation of the "Counterparty Risk,Collateral and Funding FAQ" by Brigo (2011). In this dialogue we focus more onfunding costs for the hedging strategy of a portfolio of trades, on thenon-linearities emerging from assuming borrowing and lending rates to bedifferent, on the resulting aggregation-dependent valuation process and itsoperational challenges, on the implications of the onset of central clearing,on the macro and micro effects on valuation and risk of the onset of CCPs, oninitial and variation margins impact on valuation, and on multiple discountcurves. Through questions and answers (Q&A) between a senior expert and ajunior colleague, and by referring to the growing body of literature on thesubject, we present a unified view of valuation (and risk) that takes all suchaspects into account.

CCPs, Central Clearing, CSA, Credit Collateral and Funding Costs  Valuation FAQ: Re-hypothecation, CVA, Closeout, Netting, WWR, Gap-Risk,  Initial and Variation Margins, Multiple Discount Curves, FVA?