CVA desks suffer Brexit double whammy

Cross-gamma losses estimated at more than $25m for each dealer

Lower rates and wider spreads spell trouble for CVA traders

Dealers are thought to have seen heavy losses in their derivatives portfolios after counterparty risk exploded in the immediate aftermath of the UK's June 23 vote to leave the European Union.

Counterparty exposure is measured by calculating a credit valuation adjustment (CVA) that depends on both the credit quality of the counterparty and the market risk factors of the underlying trades – with the level of interest rates being the dominant factor for most large dealers. As credit spreads jumped

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