What is cVA in finance?

In financial mathematics one defines CVA as the difference between the risk-free portfolio value and the true portfolio value that takes into account the possibility of a counterparty 's default. In other words, CVA is the market value of counterparty credit risk.

What is credit valuation adjustment (CVA)?

Credit Valuation Adjustment was introduced as a new requirement for fair value accounting during the 2007/08 Global Financial Crisis. Since its introduction, it has attracted dozens of derivatives market participants, and most of them have incorporated CVA in deal pricing.

What is a Certified Valuation Analyst (CVA)?

The certified valuation analyst (CVA) designation is a professional designation awarded by the National Association of Certified Valuators and Analysts (NACVA) to business valuation professionals. To earn the certification, individuals should hold a business degree or have sufficient work experience in business valuation.

How is cVA calculated?

Full calculation of CVA is done via Monte-Carlo simulation of all risk factors which is very computationally demanding. There exists a simple approximation for CVA which consists in buying just one default protection (Credit Default Swap) for amount of NPV of netted set of derivatives for each counterparty.