
CVA hedge losses prompt focus on swaptions and guarantees
Regulators and accountants don't agree on CVA but banks say smart hedges exist

Since late 2012, Deutsche Bank has lost €443 million euros on hedges that cut its capital requirement for derivatives counterparty exposure – a trade-off banks face because the regulatory and accounting definitions of credit valuation adjustment (CVA) are different, meaning regulators might see a hedge as effective, while accountants do not. That problem has prompted some institutions – and individuals – to look for ways to satisfy both sets of rules.
"There are structures you can put together
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