Patience pays off for XVA desks in wild week of tariff swings
Dealers avoided knee-jerk reactions that could have caused credit spreads to widen further
When US president Donald Trump’s tariffs tanked markets and plunged the business world into chaos, large derivatives dealers resisted the urge to immediately hedge their exposures to corporate clients – a reflex reaction that has in the past led to a ‘doom loop’ of ever-widening credit spreads and credit valuation adjustment (CVA) losses.
The past two weeks played out differently. “We saw more
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