CVA proxying: Nomura's alternative to "flawed" EBA method

A cross-section for CVA

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Regulators claim two-thirds of the losses suffered by banks in the aftermath of the collapse of Lehman Brothers in 2008 were due to the sliding creditworthiness of derivatives counterparties, so it was no surprise that the Basel Committee on Banking Supervision responded by introducing a new capital charge for the credit valuation adjustment (CVA) that measures this exposure.

What was more surprising was the decision to base the capital charge on credit

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