Credit Valuation Adjustment
From Open Risk Manual
Revision as of 19:22, 27 January 2020 by Wiki admin (talk | contribs)
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
