Banks shun internal models in CVA impact study

Accounting exposures win out as banks seek to align capital with front-office practice

BIS headquarters, home of the Basel Committee

Banks have picked a winner from the two exposure modelling choices offered in an overhaul of the credit valuation adjustment (CVA) capital framework, opting universally for an accounting-based approach that promises to make their hedges more effective.

Currently, most big dealers use what is known as the internal model method (IMM) to calculate their exposure for CVA, which can be very different from the numbers they report for accounting purposes. They then face the choice of which figures to

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