Russian invasion stirs up ‘perfect storm’ for XVA desks
Declining credit quality of Russian companies and spike in inflation threaten CVA and FVA double-whammy for banks
The financial fallout from Russia’s invasion of Ukraine will have an “extraordinary” effect on how banks must adjust the value of their derivatives to take into account credit and funding risks, experts warn.
Credit valuation adjustment (CVA) exposures are set to climb as Russian corporate credit spreads blow out following international economic sanctions. Meanwhile, a spike in inflation – driven by fears over disrupted access to Russian gas and oil and the associated rise in energy prices –
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