Market value of bilateral counterparty default risk — the difference between the risk-free price and the price accounting for counterparty default: CVA = (1-R),int_0^T EE(t),dPD(t), where EE(t) is the discounted expected positive exposure, R is recovery, and PD is the risk-neutral default-time distribution (often Poisson with hazard h bootstrapped from CDS quotes). Required by Basel III and IFRS 13. Wrong-way risk arises when exposure EE(t) and counterparty PD are positively correlated (e.g. selling protection on a name correlated with the counterparty).