Closing out DVA
The choice of a close-out convention applicable on the default of a derivatives counterparty can have a significant effect on the credit and debit valuation adjustments, as can the order of defaults. Jon Gregory and Ilya German examine this phenomenon in detail
Financial institutions often consider their own default in the valuation of liabilities, including a so-called debit valuation adjustment (DVA) opposite the credit valuation adjustment (CVA) accounting for the counterparty’s default. DVA is a double-edged sword. On the one hand, it creates a symmetric world where counterparties can readily agree on pricing. On the other hand, its nature creates
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 info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net
More on Markets
JP Morgan gives corporates an FX blockchain boost
Kinexys digital platform speeds cross-currency, cross-entity client payments
China eases cross-border grip in new derivatives rules
Lawyers hail return to a “more orthodox territorial approach” to regulating the market
Fannie, Freddie mortgage buying unlikely to drive rates
Adding $200 billion of MBSs in a $9 trillion market won’t revive old hedging footprint
Market-makers seek answers about CME’s cloud move
Silence on data centre changes fuels speculation over how new matching engine will handle orders
Neural networks unleashed: joint SPX/VIX calibration has never been faster
SPX and VIX options can be jointly calibrated in real time with deep neural networks
Ardagh CDS outcome satisfies some, but presents more questions
Early restructuring trigger and asset-package delivery could signify a new era for European trades
Nomura’s new global markets strategy: less risk, more return
Japan’s top dealer is moving away from risk warehousing, chasing real money clients and going global
Smarter margin. Clearer insight. Diversify liquidity.
Analysis, survey findings and practitioner perspectives examining the role of non-cash VM collateral, the operational challenges and whether tri-party infrastructure can support the next phase of change
