Hallo,
Gregory says, that for a downward sloping credit spread curve the CVA will have a higher amount than for a upward sloping curve. This effect should be even more pronounced for products with monotonical increasing EE like forwards or cross-currency swaps.
I don't understand why that is. A downward sloping credit spread curve should have a decreasing PD and vice versa. To calculate the CVA, the EE and PD profiles are multiplicated. I would have thought, that we get the highest CVA, if both EE and PD are upward sloping. Where am I wrong?
Gregory says, that for a downward sloping credit spread curve the CVA will have a higher amount than for a upward sloping curve. This effect should be even more pronounced for products with monotonical increasing EE like forwards or cross-currency swaps.
I don't understand why that is. A downward sloping credit spread curve should have a decreasing PD and vice versa. To calculate the CVA, the EE and PD profiles are multiplicated. I would have thought, that we get the highest CVA, if both EE and PD are upward sloping. Where am I wrong?
