The challenges of CVA

Credit valuation adjustment (CVA) has been a major topic of discussion within investment banks over the past couple of years. CVA desks are charged with pricing and accounting explicitly for credit risk in foreign exchange deals and any other transactions the bank does. They also dynamically manage the bank’s net credit exposure by hedging out a proportion of the credit risk. After the collapse of Lehman Brothers in September 2008, when counterparty credit risk became a crucial issue for anyone

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