Cutting Edge introduction: pricing the CVA doom loop

Pricing the CVA doom loop

In its half-year results, Deutsche Bank revealed it had lost €94 million as the result of a capital relief programme. The loss was from credit default swap (CDS) positions that can be used to mitigate Basel III’s charge for credit valuation adjustment (CVA)  volatility – which they did, and then some. The bank’s capital requirement halved from €28 billion to €14 billion.

Whether this was worth it is a matter of opinion, but it illustrates the different uses to which derivatives can be put in the

To continue reading...

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here: