# What Is the Difference between CVA and DVA in Risk Management? ▴ Question

**Published:** 2025-08-01
**Categories:** Question

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## Concept

The core distinction between [Credit Valuation Adjustment](https://prime.greeks.live/area/credit-valuation-adjustment/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (CVA) and [Debit Valuation Adjustment](https://prime.greeks.live/area/debit-valuation-adjustment/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (DVA) lies in the direction of perceived counterparty risk. CVA quantifies the market value of the risk that your counterparty will default on their obligations, representing a potential loss to you. DVA, conversely, quantifies the market value of the risk of your own institution’s default, which from a counterparty’s perspective, is their CVA.

In essence, they are two sides of the same coin, reflecting the bilateral nature of [credit risk](https://prime.greeks.live/area/credit-risk/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) in derivative contracts. The necessity for these adjustments arose from the realization that the value of a derivative is not solely dependent on market variables but also on the creditworthiness of the parties involved.

> CVA is an adjustment to the value of derivative assets to account for counterparty credit risk, while DVA is an adjustment to derivative liabilities for an entity’s own credit risk.

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## What Is the Fundamental Economic Principle Driving CVA and DVA?

The fundamental economic principle driving both CVA and DVA is the concept of [fair value accounting](https://prime.greeks.live/area/fair-value-accounting/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). This principle dictates that the value of any financial instrument should reflect all knowable risks, including the risk of default. Before the global financial crisis, the credit risk inherent in derivatives was often considered negligible. However, the widespread defaults of 2008 demonstrated that this was a flawed assumption.

The introduction of CVA and DVA into standard practice was a direct response to this, ensuring that the market value of derivatives more accurately reflects the potential for non-performance by either party. This shift ensures that financial statements provide a more realistic picture of an institution’s financial health.

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## The Symmetry of Risk

CVA and DVA are inherently symmetrical. One party’s CVA is the other’s DVA. This symmetry is crucial for achieving a consistent and fair valuation of a derivative contract between two parties. If only CVA were considered, the valuation would be one-sided, only accounting for the risk of the counterparty’s default.

By incorporating DVA, the valuation becomes bilateral, acknowledging that both parties face the risk of the other’s default. This bilateral approach is now a standard and expected component of [derivative valuation](https://prime.greeks.live/area/derivative-valuation/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), particularly under international financial reporting standards like [IFRS 13](https://prime.greeks.live/area/ifrs-13/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite).

- **Credit [Valuation Adjustment](https://prime.greeks.live/question/how-is-the-credit-value-adjustment-cva-calculated-and-integrated-into-the-pricing-of-over-the-counter-derivatives/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (CVA)** ▴ This is an adjustment made to the mark-to-market value of a portfolio of derivatives to account for the credit risk of a counterparty. It represents the market value of the potential loss if the counterparty defaults.

- **Debit Valuation Adjustment (DVA)** ▴ This is the corresponding adjustment for the firm’s own credit risk. It reflects the potential gain to the firm if it defaults on its obligations.

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## Strategy

The strategic implementation of CVA and DVA within a financial institution’s [risk management](https://prime.greeks.live/area/risk-management/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) framework is a complex undertaking. It requires a sophisticated understanding of not only the institution’s own credit risk but also that of its counterparties. The primary strategic objective is to mitigate the earnings volatility that can arise from changes in these credit risks. This is achieved through a combination of accurate calculation, proactive hedging, and careful consideration of the interplay between CVA, DVA, and other [valuation adjustments](https://prime.greeks.live/area/valuation-adjustments/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite).

> The strategic management of CVA and DVA is centered on hedging against the volatility in earnings caused by fluctuations in counterparty and own credit spreads.

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## How Do Institutions Strategically Manage CVA and DVA Volatility?

Financial institutions employ several strategies to manage the volatility associated with CVA and DVA. A primary method for hedging CVA is through the use of [credit default swaps](https://prime.greeks.live/area/credit-default-swaps/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (CDS). By purchasing a CDS on a counterparty, a bank can protect itself against losses that would occur if that counterparty defaults. Hedging DVA is a more complex proposition.

Since a DVA gain arises from a widening of the bank’s own credit spread, a perfect hedge would involve shorting its own debt. This is often impractical and can send negative signals to the market. Consequently, banks may use proxy hedges, such as CDS on similarly rated institutions or indices.

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## The Interplay with Other Valuation Adjustments

CVA and DVA are part of a larger family of valuation adjustments, collectively known as XVAs. These include Funding Valuation Adjustment (FVA), Collateral Valuation Adjustment (ColVA), and Margin Valuation Adjustment (MVA). A comprehensive risk management strategy must consider the interplay between all of these factors.

For example, FVA arises from the cost of funding uncollateralized derivatives, and it is closely linked to CVA and DVA. The strategic challenge lies in developing a holistic framework that can accurately calculate and manage all of these adjustments in a consistent and integrated manner.

### Comparison of CVA and DVA

| Aspect | Credit Valuation Adjustment (CVA) | Debit Valuation Adjustment (DVA) |
| --- | --- | --- |
| Risk Measured | Counterparty’s credit risk | Own institution’s credit risk |
| Impact on Valuation | Reduces the value of derivative assets | Increases the value of derivative liabilities |
| Hedging Instrument | Credit Default Swaps (CDS) on the counterparty | More complex; may involve shorting own debt or using proxy hedges |

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## Execution

The execution of CVA and DVA calculations is a data-intensive process that relies on sophisticated quantitative models. The core components of these calculations are the [probability of default](https://prime.greeks.live/area/probability-of-default/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (PD), the [loss given default](https://prime.greeks.live/area/loss-given-default/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (LGD), and the expected exposure (EE). These inputs are used to project the potential future losses or gains from a counterparty’s or one’s own default. The accuracy of these calculations is paramount, as they directly impact a firm’s financial statements and regulatory capital requirements.

> The execution of CVA and DVA calculations requires the precise modeling of default probabilities, loss severities, and future exposures.

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## What Are the Key Inputs for CVA and DVA Calculation?

The calculation of CVA and DVA requires several key inputs, each of which must be carefully estimated. The probability of default is typically derived from credit spreads observed in the market, such as those from CDS or corporate bonds. The loss given default is the percentage of the exposure that is expected to be lost in the event of a default. This is often based on historical data for similar instruments and counterparties.

The [expected exposure](https://prime.greeks.live/area/expected-exposure/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) is the projected value of the derivative contract at various points in the future. This is typically [calculated using Monte Carlo simulation](https://prime.greeks.live/question/from-a-risk-management-perspective-how-does-monte-carlo-tca-inform-the-sizing-of-large-block-trades/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) methods, which generate a large number of possible future paths for the underlying market variables.

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## The Role of Netting and Collateral

[Netting agreements](https://prime.greeks.live/area/netting-agreements/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) and [collateralization](https://prime.greeks.live/area/collateralization/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) can have a significant impact on CVA and DVA calculations. A master netting agreement (MNA) allows a firm to net its exposures with a counterparty across multiple derivative contracts. This can significantly reduce the net expected exposure and, therefore, the CVA.

Collateral agreements, where one party posts collateral to the other to cover potential losses, also reduce credit risk. The impact of these agreements must be incorporated into the expected exposure calculation to arrive at an accurate CVA and DVA.

- **Probability of Default (PD)** ▴ The likelihood that a counterparty will default on its obligations. This is often derived from credit default swap (CDS) spreads or bond yields.

- **Loss Given Default (LGD)** ▴ The proportion of the exposure that is expected to be lost if a default occurs. This is typically expressed as a percentage.

- **Expected Exposure (EE)** ▴ The projected value of the derivative contract at various future dates. This is usually calculated using [Monte Carlo simulation](https://prime.greeks.live/area/monte-carlo-simulation/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite).

### Example CVA Calculation

| Time Period | Expected Exposure (EE) | Probability of Default (PD) | Loss Given Default (LGD) | Discount Factor | CVA Contribution |
| --- | --- | --- | --- | --- | --- |
| Year 1 | $1,000,000 | 1.0% | 60% | 0.98 | $5,880 |
| Year 2 | $1,200,000 | 1.5% | 60% | 0.96 | $10,368 |
| Year 3 | $900,000 | 2.0% | 60% | 0.94 | $10,152 |

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## References

- The Institute and Faculty of Actuaries. “CREDIT AND DEBIT VALUATION ADJUSTMENTS.” 2017.

- Quantifi. “CVA, DVA and Hedging Earnings Volatility.” 2012.

- 3V Finance. “CVA/DVA.” 2020.

- Hull, John, and Alan White. “CVA and Wrong-Way Risk.” Financial Analysts Journal, vol. 74, no. 1, 2018, pp. 85-99.

- Gregory, Jon. “The xVA Challenge ▴ Counterparty Credit Risk, Funding, Collateral, and Capital.” John Wiley & Sons, 2015.

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## Reflection

The integration of CVA and DVA into risk management frameworks represents a significant evolution in financial practice. It moves beyond a simplistic view of derivative valuation to a more nuanced understanding of the interconnectedness of credit risk. As you consider your own operational framework, reflect on how you are currently pricing and managing this bilateral risk. Is your approach holistic, considering the full spectrum of valuation adjustments?

Are you equipped with the quantitative tools and data necessary to accurately model these complex risks? The answers to these questions will determine your ability to navigate the increasingly complex landscape of modern finance and achieve a sustainable competitive advantage.

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## Glossary

<a href="https://prime.greeks.live/area/credit-valuation-adjustment/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Credit Valuation Adjustment

Meaning ▴ Credit Valuation Adjustment (CVA), in the context of crypto, represents the market value adjustment to the fair value of a derivatives contract, quantifying the expected loss due to the counterparty's potential default over the life of the transaction. </a><a href="https://prime.greeks.live/area/debit-valuation-adjustment/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Debit Valuation Adjustment

Meaning ▴ Debit Valuation Adjustment (DVA) represents an accounting adjustment applied to the fair value of a firm's own liabilities, typically derivative contracts, to reflect changes in its own creditworthiness. </a><a href="https://prime.greeks.live/area/credit-risk/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Credit Risk

Meaning ▴ Credit Risk, within the expansive landscape of crypto investing and related financial services, refers to the potential for financial loss stemming from a borrower or counterparty's inability or unwillingness to meet their contractual obligations. </a><a href="https://prime.greeks.live/area/fair-value-accounting/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Fair Value Accounting

Meaning ▴ Fair Value Accounting is an accounting principle that mandates assets and liabilities be recorded on the balance sheet at their current market price or an estimate thereof, rather than their historical cost. </a><a href="https://prime.greeks.live/area/derivative-valuation/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Derivative Valuation

Meaning ▴ Derivative Valuation in crypto finance refers to the systematic process of determining the fair market price of financial instruments whose value is fundamentally derived from an underlying digital asset, such as Bitcoin or Ethereum. </a><a href="https://prime.greeks.live/area/ifrs-13/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Ifrs 13

Meaning ▴ IFRS 13, or International Financial Reporting Standard 13, establishes a unified framework for measuring fair value when required or permitted by other IFRS standards. </a><a href="https://prime.greeks.live/question/how-is-the-credit-value-adjustment-cva-calculated-and-integrated-into-the-pricing-of-over-the-counter-derivatives/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Valuation Adjustment

CVA quantifies counterparty default risk as a precise price adjustment, integrating it into the core valuation of OTC derivatives. </a><a href="https://prime.greeks.live/area/valuation-adjustments/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Valuation Adjustments

Meaning ▴ Valuation Adjustments (XVAs), such as CVA, DVA, FVA, and KVA, are additional charges or deductions applied to the fair value of derivative contracts and other financial instruments to account for various risks not inherently captured by traditional pricing models. </a><a href="https://prime.greeks.live/area/risk-management/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Risk Management

Meaning ▴ Risk Management, within the cryptocurrency trading domain, encompasses the comprehensive process of identifying, assessing, monitoring, and mitigating the multifaceted financial, operational, and technological exposures inherent in digital asset markets. </a><a href="https://prime.greeks.live/area/credit-default-swaps/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Credit Default Swaps

Meaning ▴ Credit Default Swaps (CDS) are derivative contracts that allow an investor to "swap" or offset their credit risk exposure to a third party. </a><a href="https://prime.greeks.live/area/probability-of-default/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Probability of Default

Meaning ▴ Probability of Default (PD) represents the likelihood that a borrower or counterparty will fail to meet its financial obligations within a specified timeframe. </a><a href="https://prime.greeks.live/area/loss-given-default/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Loss Given Default

Meaning ▴ Loss Given Default (LGD) in crypto finance quantifies the proportion of a financial exposure that a lender or counterparty anticipates losing if a borrower or counterparty fails to meet their obligations related to digital assets. </a><a href="https://prime.greeks.live/question/from-a-risk-management-perspective-how-does-monte-carlo-tca-inform-the-sizing-of-large-block-trades/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Calculated Using Monte Carlo Simulation

Monte Carlo TCA informs block trade sizing by modeling thousands of market scenarios to quantify the full probability distribution of costs. </a><a href="https://prime.greeks.live/area/expected-exposure/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Expected Exposure

Meaning ▴ Expected Exposure, in the context of crypto institutional trading and risk management, represents the anticipated future value of a portfolio or counterparty exposure, considering potential market movements and contractual agreements. </a><a href="https://prime.greeks.live/area/netting-agreements/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Netting Agreements

Meaning ▴ Netting Agreements, in the context of crypto trading and financial systems architecture, are legal contracts between two parties that permit the offsetting of mutual obligations or claims. </a><a href="https://prime.greeks.live/area/collateralization/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Collateralization

Meaning ▴ Collateralization is the practice of pledging an asset or a portfolio of assets to secure a financial obligation, such as a loan, a derivatives contract, or a margin position, particularly prevalent in crypto finance and decentralized lending protocols. </a><a href="https://prime.greeks.live/area/monte-carlo-simulation/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![An abstract composition of intersecting light planes and translucent optical elements illustrates the precision of institutional digital asset derivatives trading. It visualizes RFQ protocol dynamics, market microstructure, and the intelligence layer within a Principal OS for optimal capital efficiency, atomic settlement, and high-fidelity execution](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocols-high-fidelity-execution-framework.jpg)

## Monte Carlo Simulation

Meaning ▴ Monte Carlo simulation is a powerful computational technique that models the probability of diverse outcomes in processes that defy easy analytical prediction due to the inherent presence of random variables. </a>

**Tags:** [Netting Agreements](https://options.greeks.live/area/netting-agreements/), [Collateralization](https://options.greeks.live/area/collateralization/), [Fair Value Accounting](https://options.greeks.live/area/fair-value-accounting/), [Credit Risk](https://options.greeks.live/area/credit-risk/), [Credit Valuation Adjustment](https://options.greeks.live/area/credit-valuation-adjustment/), [Risk Management](https://options.greeks.live/area/risk-management/)	

## Discover More

- 
### [How Does Counterparty Risk Influence the Selection of Liquidity Providers?](https://options.greeks.live/question/how-does-counterparty-risk-influence-the-selection-of-liquidity-providers/)
![Modular institutional-grade execution system components reveal luminous green data pathways, symbolizing high-fidelity cross-asset connectivity. This depicts intricate market microstructure facilitating RFQ protocol integration for atomic settlement of digital asset derivatives within a Principal's operational framework, underpinned by a Prime RFQ intelligence layer.](https://options.greeks.live/wp-content/uploads/2025/07/modular-high-fidelity-execution-architecture-for-institutional-digital-asset-derivatives-rfq-protocol-integration-and-principals-operational-framework-optimization.jpg)

Counterparty risk dictates LP selection by forcing a systemic evaluation of a provider's financial, operational, and legal integrity.

- 
### [How Does Counterparty Risk Influence the Best Execution Analysis for Otc Derivatives?](https://options.greeks.live/question/how-does-counterparty-risk-influence-the-best-execution-analysis-for-otc-derivatives/)
![A precision optical component stands on a dark, reflective surface, symbolizing a Price Discovery engine for Institutional Digital Asset Derivatives. This Crypto Derivatives OS element enables High-Fidelity Execution through advanced Algorithmic Trading and Multi-Leg Spread capabilities, optimizing Market Microstructure for RFQ protocols.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-optimal-execution-system-microstructure.jpg)

Counterparty risk transforms best execution from a simple price hunt into a rigorous analysis of a counterparty's financial integrity.

- 
### [What Are the Primary Differences in CVA Calculation with and without a Netting Agreement?](https://options.greeks.live/question/what-are-the-primary-differences-in-cva-calculation-with-and-without-a-netting-agreement/)
![Intersecting transparent planes and glowing cyan structures symbolize a sophisticated institutional RFQ protocol. This depicts high-fidelity execution, robust market microstructure, and optimal price discovery for digital asset derivatives, enhancing capital efficiency and minimizing slippage via aggregated inquiry.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-framework-for-optimal-market-microstructure-and-capital-efficiency.jpg)

A netting agreement transforms CVA from a costly sum of gross exposures into a single, capital-efficient net portfolio calculation.

- 
### [How Do Central Clearing Mandates Affect the Calculation of CVA for Both Accounting and Regulatory Purposes?](https://options.greeks.live/question/how-do-central-clearing-mandates-affect-the-calculation-of-cva-for-both-accounting-and-regulatory-purposes/)
![Prime RFQ visualizes institutional digital asset derivatives RFQ protocol and high-fidelity execution. Glowing liquidity streams converge at intelligent routing nodes, aggregating market microstructure for atomic settlement, mitigating counterparty risk within dark liquidity.](https://options.greeks.live/wp-content/uploads/2025/08/prime-os-high-fidelity-digital-asset-derivatives-rfq-protocol.jpg)

Central clearing mandates transform CVA from a measure of bilateral default risk to a complex valuation of contingent exposure to a CCP's default waterfall.

- 
### [What Quantitative Models Can Dealers Use to Price the Opportunity Cost of Their Balance Sheet?](https://options.greeks.live/question/what-quantitative-models-can-dealers-use-to-price-the-opportunity-cost-of-their-balance-sheet/)
![Two smooth, teal spheres, representing institutional liquidity pools, precisely balance a metallic object, symbolizing a block trade executed via RFQ protocol. This depicts high-fidelity execution, optimizing price discovery and capital efficiency within a Principal's operational framework for digital asset derivatives.](https://options.greeks.live/wp-content/uploads/2025/07/precision-execution-bridging-institutional-liquidity-pools-via-rfq-protocol-for-optimized-digital-asset-derivatives-price-discovery.jpg)

Dealers price balance sheet opportunity cost using xVA models that quantify the lifetime funding, capital, and liquidity consumption of a trade.

- 
### [How Does the Introduction of Real Time Cva Affect a Firm’s Capital Adequacy under Basel III?](https://options.greeks.live/question/how-does-the-introduction-of-real-time-cva-affect-a-firms-capital-adequacy-under-basel-iii/)
![A precision institutional interface features a vertical display, control knobs, and a sharp element. This RFQ Protocol system ensures High-Fidelity Execution and optimal Price Discovery, facilitating Liquidity Aggregation. It's a vital component of a Principal's Operational Framework for Digital Asset Derivatives, optimizing Market Microstructure for Atomic Settlement.](https://options.greeks.live/wp-content/uploads/2025/08/institutional-digital-asset-derivatives-rfq-execution-platform-interface.jpg)

Real-time CVA transforms capital adequacy from a static report into a live, actionable metric for optimizing trade execution and risk.

- 
### [How Does Integrating Credit Risk Models Alter the Selection of Trading Counterparties?](https://options.greeks.live/question/how-does-integrating-credit-risk-models-alter-the-selection-of-trading-counterparties/)
![A central toroidal structure and intricate core are bisected by two blades: one algorithmic with circuits, the other solid. This symbolizes an institutional digital asset derivatives platform, leveraging RFQ protocols for high-fidelity execution and price discovery. It optimizes market microstructure for capital efficiency, managing multi-leg spreads and latent liquidity within a Principal's operational framework.](https://options.greeks.live/wp-content/uploads/2025/07/digital-asset-derivatives-rfq-execution-hub-integrating-algorithmic-intelligence-for-high-fidelity-price-discovery-and-liquidity-aggregation.jpg)

Integrating credit risk models transforms counterparty selection from a static approval process to a dynamic, quantitative pricing of risk.

- 
### [How Can a Firm Quantify Counterparty Risk within Its Best Execution Framework?](https://options.greeks.live/question/how-can-a-firm-quantify-counterparty-risk-within-its-best-execution-framework/)
![A centralized platform visualizes dynamic RFQ protocols and aggregated inquiry for institutional digital asset derivatives. The sharp, rotating elements represent multi-leg spread execution and high-fidelity execution within market microstructure, optimizing price discovery and capital efficiency for block trade settlement.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-engine-for-high-fidelity-execution-1.jpg)

A firm quantifies counterparty risk by integrating dynamic models of default probability, exposure, and loss into its pre-trade decision-making and ongoing monitoring.

- 
### [What Are the Primary Challenges in Accurately Modeling Wrong Way Risk within a Cva Framework?](https://options.greeks.live/question/what-are-the-primary-challenges-in-accurately-modeling-wrong-way-risk-within-a-cva-framework/)
![Intersecting teal and dark blue planes, with reflective metallic lines, depict structured pathways for institutional digital asset derivatives trading. This symbolizes high-fidelity execution, RFQ protocol orchestration, and multi-venue liquidity aggregation within a Prime RFQ, reflecting precise market microstructure and optimal price discovery.](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-digital-asset-rfq-execution-liquidity-microstructure.jpg)

The primary challenge in WWR modeling is quantifying the non-linear, state-dependent link between counterparty default and exposure.

---

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---

**Original URL:** https://options.greeks.live/question/what-is-the-difference-between-cva-and-dva-in-risk-management/
