Fair-value accounting for CVA, part two
In the second of a two-part series, Dirk Schubert analyses fair-value accounting for credit value adjustment, and considers how consistency can be achieved between bank counterparty risk management practices and requirements under International Accounting Standard 39
The treatment of credit value adjustment (CVA) under International Accounting Standard (IAS) 39 is extremely complex. In the last issue of Risk (Risk January 2011, pages 111–115), the boundary conditions for measuring the fair value for CVA were described – and a key conclusion was that IAS 39 requires the evaluation of CVA to be performed on a fair-value basis by using market (credit) spreads, if
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