easy · FRM Part 2 Credit Risk
A bank calculates its Credit Valuation Adjustment (CVA). Which of the following inputs must be used to ensure CVA represents a 'price' rather than an 'actuarial reserve'?
- Historical default frequencies from rating agencies
- Risk-neutral default probabilities and risk-neutral exposures
- Expected Loss under the bank's current accounting provisioning stages
- Through-the-cycle default probabilities with downturn LGD floors applied
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