Conditional CVA

[ihcomm (Igor Hlivka)]

Conditional CVA – also known as CCVA is a variation of the standard CVA mechanics when the measure’s parameters are restricted in their freedom to move. The restrictions are most frequently applied to the creditworthiness of either counterparty or the financial institution calculating the CVA and generally stipulate the condition for the entity to remain an investment grade CCVA requires different approach to the hazard rate process conditioned on certain events. We propose a Gamma process for the hazard rate with conditional characteristics since it represents a pure jump evolution with a number of desirable features in the credit space.