CVA news.

CVA Computing by PDE Models

In order to incorporate the credit value adjustment (CVA) in derivative contracts, we propose a set of numerical methods to solve a nonlinear partial differential equation [2] modelling the CVA. Additionally to adequate boundary conditions proposals, characteristics methods, fixed point techniques and finite elements methods are designed and implemented. A numerical test illustrates the behavio...

CVA calculation for CDS on super

The way monoline insurers estimate the FAS 157 credit value adjustments (CVA) on their ABS CDO insurance portfolios vastly overstates the benefits. We propose a simple method that is more accurate, especially when the counterparty default risk is high. The counterparty default recovery rate is also a critical input. Counterparty credit risk is an important topic today with credit crunch affecti...

Bounding Wrong-Way Risk in CVA Calculation

A credit valuation adjustment (CVA) is an adjustment applied to the value of a derivative contract or a portfolio of derivatives to account for counterparty credit risk. Measuring CVA requires combining models of market and credit risk to estimate a counterparty’s risk of default together with the market value of exposure to the counterparty at default. Wrong-way risk refers to the possibility ...

Stochastic Intensity Models of Wrong Way Risk: Wrong Way CVA Need Not Exceed Independent CVA

Wrong way risk can be incorporated in Credit Value Adjustment (CVA) calculations in a reduced form model. Hull and White [16] introduced a CVA model that captures wrong way risk by expressing the stochastic intensity of a counterparty’s default time in terms of the financial institution’s credit exposure to the counterparty. We consider a class of reduced form CVA models that includes the formu...

Stroke (CVA, Cerebrovascular Accident) — Causes and Symptoms