Valuation of Credit Risk

Fair Valuation Of Derivatives and Inclusion of Credit Risk Spread | Shasat

In today’s dynamic market, derivative valuation has evolved significantly, becoming more complex. Under FAS 157 and IFRS 13, fair value measurements must reflect market participants’ assumptions. These standards require incorporating factors such as counterparty credit risk. Additionally, IFRS 7 mandates that liability valuations account for non-performance risk, including an entity’s own credit risk. As a result, IFRS 13 enforces credit risk adjustments like debit valuation adjustment (DVA) and credit valuation adjustment (CVA).

The scope of valuation adjustments has expanded beyond CVA and DVA. It now includes Funding Value Adjustments (FVA), XVA, Capital Valuation Adjustments (KVA), and Margin Valuation Adjustments (MVA). These valuation adjustments (VAs) are crucial. They reshape derivative valuation, financial reporting, profitability, and risk management practices.

Our experts at the Valuation Desk lead these advancements. We specialize in CVA, DVA, FVA, XVA, KVA, and MVA calculations. Partnering with corporates, treasuries, and financial institutions, we provide the expertise and insights needed to navigate modern derivatives valuation with confidence.

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Should you require specialized guidance or have any queries regarding our valuation services, we invite you to get in touch with our knowledgeable team at the Valuation Desk. Our experts are ready to provide you with tailored support and insights to navigate the complexities of financial valuation. Contact us today to discover how we can assist you in achieving your financial objectives.”