Since modeling leaves complete freedom we can assume both market and credit risks can enter the picture. However the minimum requirement is (migrations and) defaults simulation, how does this configure as "pure" market risk (especially in the latter IDRC case), as various people claim?
Why would CVA be more credit-related than IRC? After all CVA is about prices and IRC about exposures and defaults (yeah, of course this is incorrect, but let's play the devil's advocate), even though they are both motivated by adverse market moves. (Atleast Brigo calls them both credit risks iirc.) Is it simply because of spreads simulation? Or because we're patching a market risk measure? Or is there a more sound reason? And why isnt IRC just a liquidity-enhanced credit VaR?
I've been given very odd and contradictory answers, and wont state here my understanding of the issue to avoid introducing more confusion and hoping to hear a clear definition of the two risks. Which is not so easy given the blurring boundary.