Learning Objectives: Explain the impact of incorporating collateralization into the CVA calculation, including the impact of margin period of risk, thresholds, and initial margins. Calculate DVA, BCVA, and BCVA as a spread. Explain the distinctions between unilateral CVA (UCVA) and BCVA, and...
Learning Objectives: Assess the credit risks of derivatives. Define credit valuation adjustment (CVA) and debt valuation adjustment (DVA). Calculate the probability of default using credit spreads. Describe, compare, and contrast various credit risk mitigants and their role in credit analysis...
Hello David,
I was going through Basel III finalisation and have found that the standard approach does not employ exposure at all in the calculation of CVA. 1. Does this mean SA-CVA will be will be in the form of spread which must be reduced from the price of a derivative? 2. Will be grateful...
Hello David! I have noticed that formula for both expected loss and CVA is the same. CVA is the present value of future exposure. Isn't expected loss the same thing? I am aware that EL is used for both credit risk and counterparty credit risk. So, why CVA if we can measure CCR with EL? Would be...
Learning objectives: Explain the motivation for and the challenges of pricing counterparty risk. Describe credit value adjustment (CVA). Calculate CVA and the CVA spread with no wrong-way risk, netting, or collateralization.
Questions:
914.1. Your colleague has drafted guidance for your firm's...
Hi there,
I am puzzled with the graph below; isn't the independent amount posted as collateral, either way, whatever happens?
Does the margin period of risk then still have an impact?
Hi @David Harper CFA FRM ,
I'm trying to understand the interactions between FRTB and CVA.
There's 'default risk charge' in FRTB, where the gross jump to default is calculated for each instrument. Is this an overlap of what CVA tries to address? If FRTB already requires capital to the held...
Learning objectives: Describe a stress test that can be performed on CVA. Calculate the stressed CVA and the stress loss on CVA. Calculate the debt value adjustment (DVA) and explain how stressing DVA enters into aggregating stress tests of CCR. Describe the common pitfalls in stress testing...
I was reading Gregory and there he mentions that 'in upward sloping curve, defaults are back loaded and in case of downward sloping curve, defaults are front loaded. What does this mean?
Why is higher recovery rate means higher implied prob. Of default?
And if that is the case then changes to CVA will be net of increase in probability ofdefault and decrease in loss amount..
So will the final CVA lesser if the recovery amount is increased?
Thanks
Kavita
Hi,
Gregory ( chapter 12) says that CVA first increases with increase in credit spread but then dips..( table 12.1).please can you explain why does a CVA dips beyond a point? it should be a monotonically increasing function and then flatten out beyond a point. Why the decrease?
Gregory ( in...
Learning outcomes: Explain why the OIS rate is a good proxy for the risk-free rate. Describe how to construct the OIS zero curve, and using it, determine forward LIBOR rates.
Questions:
507.1. A company with an average funding cost of 4.0% is currently undertaking projects worth $80.0 million...
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