Download This PaperConic CVA and DVA
17 Pages Posted: 15 Jan 2016
Date Written: December 30, 2015
Abstract
Conic pricing (or bid and ask pricing) of credit risk shows how counterparty credit risk when conservatively valued at the bid price results in larger CVA than would occur under risk neutral pricing. On the other hand when it comes to the debt valuation adjustment, since it is a liability, it must be priced at the ask. This mitigates and can even eliminate the DVA.
Keywords: CVA, DVA, conic finance, bid and ask pricing
JEL Classification: G10, G21, G32
Suggested Citation: Suggested Citation
Madan, Dilip B. and Schoutens, Wim, Conic CVA and DVA (December 30, 2015). Robert H. Smith School Research Paper No. RHS 2715403, Available at SSRN: https://ssrn.com/abstract=2715403 or http://dx.doi.org/10.2139/ssrn.2715403
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