Cutting Edge introduction: The origins of the standardised CVA charge

The origins of CVA

An eye in close-up superimposted by a screen of random numbers

Bank regulators have lost their faith in internal models, and are trying to tie them more closely to regulator-set, standardised approaches – through reporting and, possibly, floors or surcharges – but this month’s technical articles illustrate the size of the divide (see pages 16–20). First, Michael Pykhtin, senior economist at the Federal Reserve Board in Washington, DC, presents his personal interpretation of the thinking behind the standardised formula for the credit value adjustment (CVA)

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact or view our subscription options here:

You are currently unable to copy this content. Please contact to find out more.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to View our subscription options

If you already have an account, please sign in here.

Credit risk & modelling – Special report 2021

This Risk special report provides an insight on the challenges facing banks in measuring and mitigating credit risk in the current environment, and the strategies they are deploying to adapt to a more stringent regulatory approach.

The wild world of credit models

The Covid-19 pandemic has induced a kind of schizophrenia in loan-loss models. When the pandemic hit, banks overprovisioned for credit losses on the assumption that the economy would head south. But when government stimulus packages put wads of cash in…

You need to sign in to use this feature. If you don’t have a 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