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Whitepapers

Whitepapers and articles providing insight on key topics related to the financial markets.

CVA, DVA and Hedging Earnings Volatility

CVA, DVA and Hedging Earnings Volatility

Credit Value Adjustment (CVA) is the amount subtracted from the mark-to-market (MTM) value of derivative positions to account for the expected loss due to counterparty defaults. Debt Value Adjustment (DVA) is basically CVA from the counterparty’s perspective. If one party incurs a CVA loss, the other party records a corresponding DVA gain.

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The Evolution of Counterparty Credit Risk

The Evolution of Counterparty Credit Risk

Although the recent crisis has brought a heightened focus, counterparty credit risk theory and practice have been evolving for over a decade. Initially banks addressed the problem from their traditional financing experience while investment banks approached it from a derivatives perspective.

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CVA, DVA and Bank Earnings

CVA, DVA and Bank Earnings

Credit Value Adjustment (CVA) is the amount subtracted from the mark-to-market (MTM) value of derivative positions to account for the expected loss due to counterparty defaults.

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Basel III and Systemic Risk

Basel III and Systemic Risk

Basel III substantially raises the amount and quality of core Tier one capital from 2% to 7%, plus introduces an additional countercyclical buffer of up to 2.5% and a discretionary surcharge for ‘systemically important’ institutions, i.e., the big dealers.

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The Buy vs. Build Dilemma

The Buy vs. Build Dilemma

There is no question that technology investment is increasingly a strategic rather than an operational decision. The question is not whether to use technology, but rather which one to use.

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