Credit Valuation Adjustment

From MarketsWiki
Revision as of 14:18, 22 August 2012 by StephenHurst (talk | contribs)
Jump to navigation Jump to search

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]