Question

"The impact of DVA on earnings volatility is generally greater than that of CVA." Explain this statement. 

    "The impact of DVA on earnings volatility is generally greater than that of CVA." Explain this statement.
Options, Futures, and Other Derivatives
Options, Futures, and Other Derivatives
John C. Hull 10th Edition
Chapter 9, Problem 3 ↓

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It is a reflection of the market's perception of the company's credit risk. On the other hand, CVA stands for Credit Valuation Adjustment, which is a measure of the change in the value of a company's derivatives contracts due to changes in its creditworthiness.  Show more…

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"The impact of DVA on earnings volatility is generally greater than that of CVA." Explain this statement.
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