Wrong-way CVA done right
Basel III will introduce changes that are expected to significantly increase the capital charge on uncollateralised exposures, and regulators are pushing mandatory clearing of derivatives to mitigate counterparty risk.
As a result, banks have sharpened their CVA pricing and modelling infrastructure, and most have dedicated traders dynamically hedging their CVA for what it really is: a (very) complex exotic risk.
More on Basel III and Solvency II
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