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A Credit valuation adjustment (CVA), [a] in financial mathematics, is an "adjustment" to a derivative's price, as charged by a bank to a counterparty to compensate it for taking on the credit risk of that counterparty during the life of the transaction. "CVA" can refer more generally to several related concepts, as delineated aside.
Cash value added (CVA) is a measure of business profitability defined as [1] the EBITDA generated by the business, less tax, less its required return. The required return is an annuity based on the purchase price of the assets in use in the business, inflated to today's value of money, the weighted average cost of capital (WACC) and the economic life of the assets.
The CVA (and xVA) applied to a new transaction should be the incremental effect of the new transaction on the portfolio CVA. [12] While the CVA reflects the market value of counterparty credit risk, additional Valuation Adjustments for debit, funding cost, regulatory capital and margin may similarly be added.
CVA may refer to: Humanitarian Aid Cash ... Credit Valuation Adjustment, the market value of counterparty credit risk; Company voluntary arrangement, UK, ...
CVA vol. BA-CVA; SA-CVA; Operational risk. Basic; ... CVA Credit valuation adjustment; DVA Debit Valuation Adjustment – see XVA; EAD Exposure at default; EE ...
Generally, the valuation process analyzes all aspects of the business, including the company's management, capital structure, future earnings, and the market value of its assets.
Brigo worked extensively on the theory and practice of valuation adjustments with several co-authors, being among the first in introducing early counterparty risk pricing calculations (later called credit valuation adjustment - CVA) in Brigo and Masetti (2006), [25] and then focusing early on wrong way risk for CVA, see for example Brigo and ...
Valuation is a subjective exercise, and in fact, the process of valuation itself can also affect the value of the asset in question. Valuations may be needed for various reasons such as investment analysis , capital budgeting , merger and acquisition transactions, financial reporting , taxable events to determine the proper tax liability.