<t>CVA trading desks are hedging the entire Bank's CVA they hold by definition, in order to keep the whole package (CVA + hedging) as stable as possible. Hedging CVA can be done by hedging the counterparties (CDS) and the underlying exposures (rates, commodities, FX etc.). Most of the Banks' exposur...

Thanks. I was only referring to CCDS for the purpose of hedging other internal desks. Do they use CDS instead for that purpose?

<t>Hello,How do CVA Trading desks exactly work despite the obvious fact that they hedge counterparty risk for all internal desks (through CCDS) and aggregate CVA exposure into a single desk? Do they delta-hedge the CVA on various markets (rates, credit, commodity etc.) in order to crystallize as muc...

<t>Hello,How do CVA Trading desks exactly work despite the obvious fact that they hedge counterparty risk for all internal desks (through CCDS) and aggregate CVA exposure into a single desk? Do they delta-hedge the CVA on various markets (rates, credit, commodity etc.) in order to crystallize as muc...

Dealers quote premiums (and implied+base correlations for info only).

agree

Base correlation is updwards sloping indeed. It almost looks like a linear function when you look at it on a graph.

<t>i do not convert upfront premium into a running one. i keep the standard Running 500bps + Upfront structure. Base correlation and the one implied by the "old model" are obviously the same for an equity piece (0-3% in that case). so it is just a reverse engineeting of the gaussian copula model in ...

<t>dealers started to quote base correlation in the US and in Europe. there are 2 different types of base correlation: one coming from JP Morgan paper and one from the Bear paper. dealers tend to quote the base calculated from the JP Morgan one. as far as i am concerned, i do match exactly bid/offer...

i think i found it. it just needs to be a tradable asset. the ratio is obviously a martingale as we exchange one traded asset for another.

<t>i have a fundamental question that bohers me regarding numeraires.it is well known that the numeraire attached to risk neutral probability is the cash account b(t) = exp (INT 0..t Ru du) where Ru is the short rate:p(t)/b(t) = E(Q)[X/b(T)] where E(Q) means expected value under Q (risk neutral) mea...

theta is more for equity options. i agree we should use carry here.

there is thetat here bc u pay upfront - if u pay quarterly it is different.

i meant:- Accrualnot +

salah, i call this carry/accrual (or cash management), not theta. if one day goes by, my MtM goes down because of 1 day accrual. theta in my opinion is pure time decay, which applies to equity options values going down with time...MtM = (Change is Spread + Accrual) * RiskyAnnuity