Debt Valuation Adjustment (DVA)

DVA is the gain to the party arising from its own credit risk: if you default, you may not have to pay the full MTM. DVA = CVA viewed from the counterparty's perspective. A firm with a wide CDS spread has a larger DVA — intuitively, the more likely you are to default, the more 'benefit' you capture from not having to pay. This creates the controversial 'DVA P&L': firms report gains when their own credit deteriorates. BCVA (Bilateral CVA) = CVA − DVA nets out both adjustments, giving the symmetric bilateral credit adjustment used in dealer-to-dealer pricing.