Credit valuation adjustment for energy and commodity derivatives
Calculating CVA at trade and portfolio levels
Until recently, counterparty and liquidity risks have been largely ignored in the valuation and risk measurement of energy and commodity portfolios. However, large credit losses and funding liquidity problems, significant advances in credit risk measurement technology, and changes in accounting standards and regulations such as Dodd-Frank have led to an increased focus on improving counterparty and liquidity risk management practices.
At the centre of the credit revolution is the concept of
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