- 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?
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