Shearman Logo

balance scale

Nov 11, 2013

Basel III Framework: The Credit Valuation Adjustment (CVA) Charge for OTC Derivative Trades

Subscribe

Jump to...

 
The credit valuation adjustment charge in Basel III appears, at first glance, to be the preserve of quantitative analysts and the like. However, while complex, the CVA charge requires more widespread attention as it materially increases the required capital for OTC derivative trading activities and is driving significant change in that sector. The divergence between the US and EU approaches to the adoption of the CVA charge highlights how the Basel standards have been interpreted differently in this important area, creating uncertainty and opportunities for arbitrage.

View full memo, Basel III Framework: The Credit Valuation Adjustment (CVA) Charge for OTC Derivative Trades