Search results
Results From The WOW.Com Content Network
A Credit valuation adjustment (CVA), [a] in financial mathematics, is an "adjustment" to a derivative's price, as charged by a bank to a counterparty to compensate it for taking on the credit risk of that counterparty during the life of the transaction. "CVA" can refer more generally to several related concepts, as delineated aside.
Offsetting counterparty risk is not always possible, e.g. because of temporary liquidity issues or longer-term systemic reasons. [16] Further, counterparty risk increases due to positively correlated risk factors; accounting for this correlation between portfolio risk factors and counterparty default in risk management methodology is not trivial.
This CVA is the discounted risk-neutral expectation value of the loss expected due to the counterparty not paying in accordance with the contractual terms, and is typically calculated under a simulation framework; [12] [13] see Credit valuation adjustment § Calculation.
The term is generally used in this context in relation to "counterparty risk", [2] which is the risk of monetary loss a firm may be exposed to if the counterparty to an over-the-counter securities trade encounters difficulty meeting its obligations under the terms of the transaction.
Famous people quotes about life. 46. “There is only one certainty in life and that is that nothing is certain.” —G.K. Chesterton (June 1926) 47. “Make it a rule of life never to regret and ...
The advantages of a central counterparty clearing arrangement are greater transparency of the risks, reduced processing costs, and greater certainty in cases of default by a member. [3] Once a trade has been executed by two counterparties, it is submitted to a clearing house, which then steps between the two original traders' clearing firms and ...
PFE is the "Potential Future Exposure" to the counterparty: per asset class, trade-"add-ons" are aggregated to "hedging sets", with positions allowed to offset based on specified correlation assumptions, thereby reducing net exposure; these are in turn aggregated to counterparty "netting sets"; this aggregated amount is then offset by the ...
A 'Counterpart' is a person or thing that has the same purpose as another one in a different place or organization [1] In paleontology, one half of a split compression fossil Counterpart International , a U.S.-based development charity