Difference between revisions of "Credit Valuation Adjustment"

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Credit Valuation Adjustment (CVA) is a metric representing the difference between the risk free portfolio value and the true portfolio value, taking counterparty risk into account. CVA is the market value of the counterparty [[credit risk]]. <ref>{{cite web|url=http://www.fow.com/Article/3077998/Babicz-Effective-CVA-a-necessity-for-banks.html|name=Babicz: Effective CVA a necessity for banks|org=FOW|date=August 22, 2012}}</ref>
Credit Valuation Adjustment (CVA) is a metric representing the difference between the risk free portfolio value and the true portfolio value, taking counterparty risk into account. CVA is the market value of the counterparty [[credit risk]]. <ref>{{cite web|url=http://www.fow.com/Article/3077998/Babicz-Effective-CVA-a-necessity-for-banks.html|name=Babicz: Effective CVA a necessity for banks|org=FOW|date=August 22, 2012}}</ref>



Revision as of 19:25, 3 December 2013


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Credit Valuation Adjustment (CVA) is a metric representing the difference between the risk free portfolio value and the true portfolio value, taking counterparty risk into account. CVA is the market value of the counterparty credit risk. [1]

The metric has gained increasing attention the Basel III accords as well as in the Dodd-Frank Act, where the definition of "Tier 1 Capital" has been called into question in regards to categorizing and weighing OTC derivatives. [2]

References[edit]