Basel Committee to rethink CVA capital charge

Laurie Carver
Mauro Cesa
25 Aug 2010

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The Basel Committee on Banking Supervision may modify its controversial capital charge for credit value adjustment (CVA), following research published this month in Risk that appears to show flaws in the methodology, with the end result that banks could be penalised for hedging their exposures.

The committee first published its proposals on a CVA capital charge in December 2009, based on a bond-equivalent approach that uses a hypothetical zero-coupon bond to mimic counterparty risk.

However, the

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