Credit Valuation Adjustment (CVA)
Royal Bank of Scotland (RBS); Barclays Capital; Lehman Brothers Europe; Toronto-Dominion (TD) Bank Financial Group - TD Securities
August 28, 2008
This paper provides an overview of counterparty default risk and counter-party valuation adjustments, within the context of collateralized and un-collateralized trading relationships. The counterparty valuation adjustment terms are derived by decomposing an un-defaultable portfolio into a set of binary states. These states are a set of market values (positive or negative), default states (default or no default) and recoveries (recover the the recovery amount or not). In particular, the asset charge is formulated for both un-collateralized and collateralized portfolios while different models are provided for the collateral transfer calculations of the collateralized trading accounts.
Number of Pages in PDF File: 22working papers series
Date posted: December 2, 2008 ; Last revised: October 19, 2010
© 2015 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo6 in 0.360 seconds