Fair-value accounting for CVA, part two

Fair-value accounting for CVA

The treatment of credit value adjustment (CVA) under International Accounting Standard (IAS) 39 is extremely complex. In the last issue of Risk (Risk January 2011, pages 111–115), the boundary conditions for measuring the fair value for CVA were described – and a key conclusion was that IAS 39 requires the evaluation of CVA to be performed on a fair-value basis by using market (credit) spreads, if available. The practical implications of measuring CVA under IAS 39 are now considered.

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