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Currently, the mandated formula for the calculation for CVA, for regulatory purposes, is as follows
Which equates to
Where is the probability of default between time and . For further read more
CVA, or Credit Value Adjustment, is an additional charge that a client must pay for a derivatives transaction, to compensate their counterparty for the fact that they are not risk read more
What is the impact or what is the potential difference between the regulatory method and whatever model an institution may use to calculate their CVA VaR (as well as their read more
DVA is the controversial twin of CVA. The acceptence of DVA as a mark-to-market item on derivatives positions should be no more controversial than the acceptance of CVA. If one read more
Many options model papers propose an option model, derive a solution, or deal with the framework the model provides in which to price an option, and finally, detail how to read more
Speaking at the Risk Annual Summit, Damiano Brigo warned of the potential introduction of systemic risk by institutions hedging their DVA risk.
“If you think about this strategy in 2008, read more