In this paper we discuss the issue of computation of the bilateral credit valuation adjustment (CVA) under rating … transitions of the two parties to the contract. In this framework, we derive the representation for bilateral CVA. We also …

reluctance to clear derivative trades in the absence of a central clearing obligation. We develop a comprehensive understanding … moving from a bilateral to a clearing architecture for derivative markets. Previous studies suggest that central clearing is … its counterparties: 1) correlation across and within derivative classes (i.e., systematic risk), 2) collateralization of …