When two entities enter into a series of transactions, they also exchange an implicit option to default. Credit valuation adjustment (CVA) is the price or cost of credit risk for a deal or portfolio with a given counterparty.
CVA can be calculated at the individual transaction level or for each counterparty portfolio. The overall CVA for the exposures with a given counterparty is not simply the sum of the CVAs for individual deals, because of the need to take into account credit risk mitigation
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