Perverse capital - Risk.net

Laurie Carver
01 Aug 2011

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The post-Lehman risk management landscape is different in many ways, but perhaps the most noticeable change is a greater sensitivity to counterparty credit risk. The Basel III capital requirements include a controversial charge for credit value adjustment (CVA) – the market value of changes in counterparty exposure, which regulators claim accounted for roughly two-thirds of banks’ losses during the financial crisis.

The design of the charge has evolved gradually. Flaws in the original equivalent

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