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Hi all, I have some doubt regarding this part in Gregory, chapter 4: "Hedging: Hedging counterparty risk with instruments such as credit default swaps (CDSs) aims to protect against potential default events and adverse credit spread movements. o Hedging creates operational risk and additional...

Hello guys, I have a doubt about Recovery impact on CVA as explained in Gregory page 142 : "increasing LGD reduces the risk-neutral default probability but increases the loss in the event of default". If mathematically I can understand it, I have some problem to understand the economic logic...