Getting CVA up and running

Getting CVA up and running

An important consequence of the recent financial crisis is the necessity, due to both market volatility and regulatory constraints, for banks to include counterparty risk in their profit and loss. The adjustment made to the price of an over-the-counter derivatives transaction as a result of the risky nature of their counterparty is known as the credit value adjustment (CVA). The CVA becomes an effective price factor of a deal, just like the interest rate or the exchange rate, and can often have