  Derivative pricing is about cash flow discounting at the riskfree rate. This
teaching has lost its meaning post the financial crisis, due to the addition of
extra value adjustments (XVA), which also made derivatives pricing and
valuation a very difficult task for investors. This article recovers a properly
defined discount rate that corresponds to different collateral and margin
schemes. A binomial tree model is developed, enabling end-users to price in
counterparty default and funding risk. Coherent XVAs, if needed, naturally
result from decomposing the discount rate, and can be computed on the same
tree.
