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ERM Glossary: Credit valuation adjustment (CVA)

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Credit valuation adjustment (CVA) is an adjustment to the fair value of a (usually derivative) asset to reflect the creditworthiness of the counterparty (as far as the bank using the valuation in its balance sheet is concerned).

 

Banks may also in some circumstances apply equivalent adjustments to the fair value of derivatives to reflect their own creditworthiness, which is then called debit valuation adjustment (DVA).

 


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