Financial Risk Manager Part 1

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Answer: Credit value adjustment (CVA)

**Credit value adjustment (CVA)** is the most common way to incorporate counterparty credit risk into the pricing of a derivative transaction. CVA represents the expected loss from counterparty default, adjusted for exposure, default probability, and recovery rate.

Author: Manit Arora

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Answer: Credit value adjustment (CVA)

**Credit value adjustment (CVA)** is the most common way to incorporate counterparty credit risk into the pricing of a derivative transaction. CVA represents the expected loss from counterparty default, adjusted for exposure, default probability, and recovery rate.

Author: Manit Arora

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Question 602.2. Among the following, what is the MOST COMMON method for quantifying counterparty risk into the price of a transaction?

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MManit

Last updated: April 18, 2026 at 11:32

0

A

Novation

B

Vertical setup

C

Trade compression

D

Credit value adjustment (CVA)

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