The impact of the new CVA risk regulation framework on calculation methods and the infrastructure of banks could potentially be the turning point for many of the medium-sized institutes we are seeing in the market.
There are two ways for banks to compute CVA VaR, standardised and advanced methods, depending on their current regulatory approval. Furthermore, firms can potentially reduce the capital charges via eligible hedges.
The objectives of setting up a counterparty risk management process can be split into three categories - CVA pricing, exposure management, and regulatory requirements.
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