Published April 19, 2011
Credit value adjustment needed to incentivise pricing of risk and optimal hedging
Colin Lawrence, director, prudential risk division, Financial Services Authority, UK, discusses the credit valuation adjustments necessary to save banking as we know it.
Recent proposed changes to the capital charges on credit value adjustment (CVA) have stirred up a storm in the banking community. Is this sufficient for banks to reduce counterparty risks in Asia? To what extent will the changes improve consistency across the banks in Asia? CVAs are a necessity ...