Credit Valuation Adjustment Models

Credit valuation adjustment has been the subject of increased attention by dealers and end-users alike. The bankruptcy of Lehman Brothers, the default or significant downgrade of a number of once-AAA-rated and non-collateral-posting swap counterparties, particularly in the insurance sector, have all fired the interest. Other factors include the implementation of FAS 157 in the U.S. and IAS 39 in Europe, proposed Basel capital requirement rules, impending regulations under the Dodd-Frank Act and increased demand for pricing transparency by corporate end-users.