Credit Valuation Challenge
To what extent were losses during the height of the financial crisis incurred by counterparty default? Most people would probably assume that the majority of them, at least, were down to the other side of the trade not being able to fulfill its obligations. Some might estimate conservatively, and say half. Both are wrong—that number stands at approximately 33 percent, while the rest can be accounted for by charges stemming from credit valuation adjustment (CVA).
Put simply, CVA measures the risk
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