Cash CVA -- Credit Valuation Adjustment in the Cash Form

18 Pages Posted: 22 Apr 2021 Last revised: 19 Feb 2023

Date Written: April 18, 2021


Credit default swaps (CDS) are unfunded, or the synthetic form of credit exposure, while bonds are fully funded, thus the cash form. Borrowing this industry jargon, credit valuation adjustment (CVA) would be seen synthetic, because it is defined as the present value of buying a default protection on counterparty exposure through CDS. This article presents the cash form of counterparty risk, Cash CVA. It links directly to counterparties’ senior unsecured bond curves, thus no longer requiring recovery rate and CDS curve inputs. Replacing CVA with cash CVA is necessitated, because single name CDS is no longer liquid following massive dealer-bank exit from CDS trading business post the Financial Crisis of 2007-2008, while bond liquidity has significantly improved due to advances in corporate bond electronic trading.

Keywords: Credit valuation adjustment (CVA), Funding Valuation Adjustment (FVA), cash CVA, synthetic CVA

JEL Classification: G11, G12, G18, G20, G28

Suggested Citation

Lou, Wujiang, Cash CVA -- Credit Valuation Adjustment in the Cash Form (April 18, 2021). Available at SSRN: or

Wujiang Lou (Contact Author)

NYU/Courant ( email )

251 Mercer St
New York, NY 10003-711
United States

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