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Bilateral CVA (BCVA)

Net XVA combining your counterparty's default risk (CVA) and your own default risk (DVA).

BCVA = CVA − DVA. A positive BCVA means you owe a net adjustment for counterparty risk. A negative BCVA means your own credit risk benefit (DVA) outweighs the counterparty CVA. BCVA is the theoretically symmetric bilateral price of counterparty credit risk in derivative transactions. In practice, most banks now compute full XVA desks covering CVA, DVA, FVA (Funding), MVA (Margin), and KVA (Capital).

Formula
BCVA=CVA⏟cp default−DVA⏟own default\text{BCVA} = \underbrace{\text{CVA}}_{\text{cp default}} - \underbrace{\text{DVA}}_{\text{own default}}

Related Terms

Credit Valuation Adjustment (CVA)

The market value of counterparty default risk — the expected cost of the counterparty failing to pay on a derivative.

Debt Valuation Adjustment (DVA)

The benefit to a party from its own potential default — the mirror image of CVA applied to your own credit risk.

Interest Rate Swap (IRS)

An agreement to exchange fixed-rate cash flows for floating-rate cash flows on a notional principal.