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CVA and XVA in Capital and Finance Reporting

Article Quant Q&A · Author: SaurabhD
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Summary

The document explains one reason a finance team may need a credit valuation adjustment (CVA): under Basel III reporting, a CVA charge can increase the capital required for trading over-the-counter derivatives. It also places CVA alongside debit valuation adjustment (DVA) and funding valuation adjustment (FVA), which are related valuation adjustments.

These adjustments may be grouped under the broader term XVA because they share a similar general principle. The response is brief and does not describe calculation methods, reporting details, or the distinct treatment of each adjustment. It offers a high-level connection between derivative valuation adjustments and capital requirements rather than a complete regulatory guide.

Key ideas

  • A CVA charge can increase capital requirements for OTC derivatives trading under Basel III reporting.
  • DVA and FVA are related valuation adjustments that may be discussed alongside CVA.
  • CVA, DVA, and FVA are often grouped under the broader XVA label.
  • The document gives a high-level explanation and does not detail calculation or reporting procedures.

Tags

Derivatives pricingRisk managementFixed income
Full text
# CVA number used by Finance Team


# CVA number used by Finance Team












What are different reasons, Finance Team will need CVA number for? Is there any specific regulatory reporting to be done?

## Answer by user7056 (score 2)

https://quant.stackexchange.com/a/14227

The CVA charge in Basel iii reporting increases the capital required for OTC derivatives trading. Apart from CVA, there are DVA and FVA that are important. The adjustments might be unitary reffered to as XVA, as the principle is the same.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.