Illiquidity holding back CCDS, despite Basel III endorsement

Basel III allows contingent credit default swaps (CCDSs) to be used as a mitigant when calculating credit value adjustment. Advocates of CCDSs hope that will give the market some momentum – but others say the product will continue to suffer from a shortage of protection sellers. By Peter Madigan

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The new Basel III capital charge for credit value adjustment (CVA) has been subject to bitter criticism since it was first mooted at the end of 2009 – and despite one significant overhaul to the capital calculation formula and a few additional tweaks here and there, that criticism has continued. One key complaint has been that the Basel Committee on Banking Supervision has opted to play it safe: its formula is more conservative and more simplistic than the models banks use internally to measure

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