Japan’s megabanks begin pricing in CVA

Local firms align with foreign dealers to include counterparty credit risk in corporate swap quotes

Mizuho took a $280 million hit in March following the introduction of CVA into its accounts

Japanese megabanks and securities firms have over the past 12 months begun to price the cost of counterparty credit risk into corporate derivatives trades, according to dealers, bringing them more into line with their international peers.

Local banks only recently agreed to account for an adjustment to the fair value of a derivatives portfolio for counterparty credit risk, known as a credit valuation adjustment (CVA). As a result, this cost, and in some cases even the cost of funding

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