CVA Calculation for CDS on Super Senior ABS CDO
by Hui Li of AIG
Abstract: The way monoline insurers estimate the FAS 157 credit value adjustments (CVA) on their ABS CDO insurance portfolios vastly overstates the benefits. We propose a simple method that is more accurate, especially when the counterparty default risk is high. The counterparty default recovery rate is also a critical input.
Keywords: Credit Value Adjustment, Super Senior ABS CDO, Monoline insurer.