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Hi,

Kavita

- Gregory ( chapter 12) says that CVA first increases with increase in credit spread but then dips..( table 12.1).please can you explain why does a CVA dips beyond a point? it should be a monotonically increasing function and then flatten out beyond a point. Why the decrease?

- Gregory ( in chapter 12) again says that:
**CVA is a linear combination of EE, and netting changes only the exposure and has no impact on recovery values, discount factors or default probabilities**. The above sentence is not making any sense to me. CVA is a function of recovery value, EE and default probabilities.. So why does it say "no impact" on recovery values etc..

- According to Gregory chapter 12

Risky value = risk free value - CVA.

Okay I am completely missing the point here..shouldn't it be

Risky value = risk free value + CVA?

where am I going wrong?

Kavita

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