# Tag Info

### MVA, initial margin valuation adjustment for derivatives

The name initial margin is somewhat misleading as initial margin is dynamic i.e it is adjusted through time. So, as you say, on day zero, it can be computed as a 10 day VaR VaR(10, t0). But, on day ...

### CVA - Where does the default probability (PD) come from?

"Debt issuer default risk" and "counterparty risk" are very similar. From Risk magazine: Counterparty Risk The risk that a counterparty to a transaction or contract will default (...
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### Credit Valuation adjustment (CVA) Hedges

To continue from uness' answer (edit: just seen the OP was very old, but will leave here anyway!) . The greeks will be every element of market risk to which the the CVA is sensitive. Writing in words ...
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### Credit Valuation adjustment (CVA) Hedges

CVA is a price. Just like any price, you compute its sensitivities (greeks) and then use financial products to bring them as close to zero as possible. It's not possible to derive a hedging strategy ...
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Accepted

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1 vote

### In CVA simulation, timesteps vs number of simulations?

Depends on the portfolio, know that is not very helpful! So here is a simple test. Try a reasonable base, say 100 times 10k, then increase the number of timesteps, see how much the results change by, ...
1 vote

### Collateralized / uncollateralized swap

The pre-crisis concept of a risk-free rate was either government securities or LIBOR-based swap rates. As LIBOR is unsecured bank borrowing-lending rate, this was clearly an approximation too far. ...
• 969
1 vote
Accepted

### Collateralized / uncollateralized swap

1. Discount Yes, usually, people discount using the risk free rate, and then adjust for the counterparty credit risk (CVA), funding cost (FVA), and so on. 2. Collateral The Margin period of risk: ...
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1 vote

### Why xVA is only applicable to derivatives contracts

For a portfolio of loans, the expected loss is considered as a cost and not a risk. Usually, one would compute this expected loss, price it in the loan's interest and set it aside (provision). The ...
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1 vote

### MVA, initial margin valuation adjustment for derivatives

Unlike VM which covers MtMs , IM covers close-out risk (2 weeks portfolio volatility)., it is dynamic , and required for major OTC users (see BCBS IOSCO 2015 ) i.e top up segregated account if need be ...
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