Original Research

A primer on counterparty valuation adjustments in South Africa

Gary Wayne van Vuuren, Ja'nel Esterhuysen
South African Journal of Economic and Management Sciences | Vol 17, No 5 | a648 | DOI: https://doi.org/10.4102/sajems.v17i5.648 | © 2014 Gary Wayne van Vuuren, Ja'nel Esterhuysen | This work is licensed under CC Attribution 4.0
Submitted: 08 June 2013 | Published: 28 November 2014

About the author(s)

Gary Wayne van Vuuren, North West University & Fitch Ratings, UK, United Kingdom
Ja'nel Esterhuysen, NWU, South Africa

Full Text:



Counterparty valuation adjustment (CVA) risk accounts for losses due to the deterioration in credit quality of derivative counterparties with large credit spreads. Of the losses attributed to counterparty credit risk incurred during the financial crisis of 2008-9 were due to CVA risk; the remaining third were due to actual defaults. Regulatory authorities have acknowledged and included this risk in the new Basel III rules. The capital implications of CVA risk in the South African milieu are explored, as well as the sensitivity of CVA risk components to market variables. Proposed methodologies for calculating changes in CVA are found to be unstable and unreliable at high average spread levels.


No related keywords in the metadata.


Total abstract views: 3509
Total article views: 2478

Crossref Citations

No related citations found.