• The multiplier $m_{CVA}$ is used with the expected shortfall measure to compensate for a higher level of model risk in calculation of CVA and CVA sensitivities.
• For transactions that give rise to a significant level of dependence between exposure and the counterparty’s credit quality, this dependence should be taken into account.
• Banks that fail to account for this dependence must use a higher value of multiplier $m_{CVA}$, default value is [ 1.5 ].
• However, the default value of the multiplier can be increased by the bank’s supervisory authority if it determines that the bank’s CVA model risk is higher than its peer’s.
• In particular, the default value will be increased if the bank does not account for the dependence between exposure and counterparty credit quality in its CVA calculations.

Excel

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