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I don't understand CVA

Joined
9/19/15
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100
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According to Wikipedia, CVA is defined as the difference between the risk-free portfolio value and the true portfolio value that takes into account the possibility of a counterparty’s default.

What does the 'risk-free portfolio value' mean? I guess it's similar to the risk premium (risky asset return - riskfree asset return), but can anyone provide an example of the risk-free portfolio value in the context of CVA?
 
According to Wikipedia, CVA is defined as the difference between the risk-free portfolio value and the true portfolio value that takes into account the possibility of a counterparty’s default.

What does the 'risk-free portfolio value' mean? I guess it's similar to the risk premium (risky asset return - riskfree asset return), but can anyone provide an example of the risk-free portfolio value in the context of CVA?
Start with Canabarro and Duffie.

http://www.darrellduffie.com/uploads/surveys/duffiecanabarro2004.pdf
 
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