medium · FRM Part 2 Credit Risk
Which of the following describes the 'Debit Valuation Adjustment' (DVA) gain reported by banks during the 2008-2011 period?
- A realized cash inflow booked upon the close-out of a defaulting counterparty's trades.
- An accounting profit resulting from the widening of the bank's own credit spreads.
- A reduction in the funding cost charged on the bank's uncollateralized derivative book.
- A regulatory capital benefit that banks may recognize in full under Basel III rules.
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