Credit Valuation Adjustment

The printable version is no longer supported and may have rendering errors. Please update your browser bookmarks and please use the default browser print function instead.

Definition

Credit valuation adjustment (Commonly abbreviated CVA) is the difference between the Credit Risk-free value of a contract or set of contracts and the value that takes into account the possibility of a Counterparty’s default.

Issues and Challenges

Model dependent valuation
Complications due to the fact that both counterparties to a contract might default

References