XVA Framework & Counterparty Risk
Comprehensive guide to CVA, DVA, FVA, and XVA management for derivatives portfolios
XVA Framework & Counterparty Risk
Executive Summary
Valuation adjustments (XVAs) have fundamentally transformed derivatives pricing and risk management since the 2008 financial crisis. What began as credit valuation adjustment (CVA) for counterparty credit risk has expanded into a comprehensive framework encompassing funding, capital, and collateral costs. XVA desks at major dealers now manage these adjustments centrally, with XVA charges representing billions of dollars of balance sheet impact. For dealers and risk teams, CVA/FVA/KVA drive pricing and P&L; for consultants advising on derivatives valuation, counterparty risk, or XVA implementation, the ability to explain components and trade-offs in clear terms supports credible delivery and value for money. This manual provides comprehensive coverage of XVA components, calculation methodologies, and organizational frameworks.