The Credit Value Adjustment, or CVA for short, is the difference between the risk free value and the value including counterparty risk of a contract or portfolio.

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Building PD model using Moody's Historical default rates

I want to build a Probability of default model using moody's cumulative default rates. I was trying to calculate the average default intensity rate and from there I dont know where to go. Example : ...
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59 views

CVA using difference between 2 counterparty's spreads

The approximation to calculate CVA as a spread is $CVA = Spread * Expected$ $Exposure$. I assume this means the counterparty's spread over a proxy for the risk free rate such as LIBOR or OIS. Is this ...
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39 views

CVA as a running spread - risk annuity calculation in the Monte Carlo framework

I have simulated future term structures in the one-factor Hull-White model and calculated the CVA of a particular trade (let's say, now I have it in absolute value, in dollars). However, I want to ...
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98 views

Why can't marginal CVA be used in pricing?

"Marginal CVA may be useful to breakdown a CVA for any number of netted trades into trade-level contributions that sum to the total CVA. Whilst it might not be used for pricing new transactions (due ...
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Number of simulations for Monte Carlo CVA

Assuming we are calculating CVA across a netting set with a Monte Carlo methodology: 1) How many future dates ("horizons") would be typical - or does that depend entirely upon the composition of the ...
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56 views

CVA for an inflation linked swap

I am trying to value an inflation linked swap and wish to calculate the associated CVA and DVA. I think the best way to approach this would be via a simulation. Suppose I wish to calculate CVA over ...
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1answer
95 views

How are netting sets determined for CVA calculation?

In his book, Gregory describes a netting set as a set of trades that can be legally netted together in the event of a default Obviously, the netting agreements (as per ISDA master agreement) ...
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3answers
204 views

How do right-to-break clauses affect CVA calculations

Does the presence of a optional/mandatory right-to-break clause affect CVA calculations, and if so, how? Given two (otherwise identical) 10y swaps with the same counterparty, one of which has a right ...
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311 views

How to estimate CVA by valuing a CDS of the counterparty?

I'm trying to estimate CVA of one of my derivatives by valuing a credit default swap (CDS) of my counterparty. However, I don't know how to set up the CDS deal (notional amount, maturity, etc.). ...
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112 views

CVA/CDVA - Worsened Credit Quality implies profit?

In the book Counterparty Credit Risk, Collateral and Funding by Brigo et al I found the following: credit quality of investor WORSENS $\Rightarrow$ books POSITIVE MARK TO MKT credit quality of ...
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CVA formula proof

I'm struggling to prove the CVA formula in this paper. Equation (3) is the result of computing the expectation of formula (1). Could you please show me how to prove that?
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106 views

CVA number used by Finance Team

What are different reasons, Finance Team will need CVA number for? Is there any specific regulatory reporting to be done?
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How is the default probability implied from market implied CDS spreads for CVA/DVA calculation?

From point 38 on P.17 the default probability can be implied from market implied CDS spreads. "Macro Surface" method is mentioned, but I cannot get any clue of what it is? Where do I get the acedemic ...
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Accrued Interest in CVA DVA

I'm implementing the CVA/DVA for some derivatives, which follows a Hull-White model (one factor). Once I have calibrated the model and I get the results with the simulation, a quite interesting ...
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157 views

CVA DVA and Bilateral adjustment

I've already computed the CVA\DVA and now I would like to compute the bilateral adjustment. Does anyone know the relationship between the CVA\DVA with the bilateral adjustment? I mean a paper, ...
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246 views

Credit Valuation Adjustment Implementation

I am trying to help a friend with her thesis on Counterparty Credit Risk where she intends to have a somewhat lengthy treatment on Credit Valuation Adjustment (CVA). Specifically I am looking to help ...
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202 views

Basel CVA VaR with R/WWR

In Basel III the CVA VaR “is restricted to changes in the counterparties’ credit spreads and does not model the sensitivity of CVA to changes in other market factors, such as changes in the value of ...
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280 views

How to calculate a the PFE for a Swaption?

How do you calculate the Potential Future Exposure (PFE) for a swaption? Do you incorporate the dynamics of implied volatility when you are running your simulations? Is there a standard way to ...
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Recommendation for a book on CVA/Credit Risk and PD/LGD/EAD modeling?

I need suggestions for some good books on the following topics: Credit Value Adjustment (CVA) / Credit Risk Probability of Default / Loss-Given-Default / Exposure-At-Default modeling Any pointers ...
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4answers
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What is the role of Credit Valuation Adjustment (CVA) desks in investment banks?

What does a CVA (Credit Valuation Adjustment) desk do, and how are its activities different from other trading desks? Can you work as a quant for a CVA desk and consider your role "front office"?
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Credit Valuation Adjustments — computation issues

I'm currently working on my Masters project related to accelerating Greeks computations for CVA on mixed interest rate portfolios. I would like to know about the status of technology for CVA and its ...