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| CVA Calculation for CDS on Super Senior ABS CDO by Hui Li of AIG August 2008 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. It all boils down to the default recovery rate assumption. Keywords: Credit Value Adjustment, Super Senior ABS CDO, Monoline insurer, FAS 157. Download paper (70K PDF) 4 pages Related reading: Counterparty Risk for Credit Default Swaps: Impact of spread volatility and default correlation
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