Basel to overhaul CVA capital calculation

Basel to overhaul CVA capital calculation

Mark White

The Basel Committee on Banking Supervision is expected to publish changes to its controversial capital charge for credit value adjustment (CVA) this month.

The modifications are intended to address criticism of the method originally proposed in December last year to calculate CVA exposures –known as the bond-equivalent approach. Dealers had argued the methodology was a poor proxy for CVA risk and would undermine sound hedging practices (Risk February 2010, pages 19–21).

The changes will make the

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