hard · Frm Part 2 Credit Risk
A bank is calculating the CVA (Credit Value Adjustment) for a derivative portfolio with a counterparty whose 5-year USD CDS trades at 350 basis points. The Expected Positive Exposure (EPE) is estimated at $40m.
Using a flat-spread approximation, what is the estimated annual CVA charge in running terms?
- $14.0m
- $0.84m
- $5.6m
- $1.4m
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