http://ftalphaville.ft.com/blog/2010/06/15/261671/of-cva-and-sovereign-cds/
The BoE, who are now the new financial regulators, seem to have spotted that derivative businesses have things called "CVA" desks which dynamically manage counterparty risk. Given that the first CVA desk started almost 15 years ago, there is a worrying lag between a key market development and policy makers catching up.
CVA desks are undoubtedly the "good guys" when it comes to derivatives trading. It should also be noted that there was a strong positive correlation between the age of a bank's CVA desk and its share price performance during the credit crunch.
Policy makers should spend considerable time in understanding what it is CVA traders do and then wholeheartedly support them. The CVA desk has arguably been the only oasis of sanity in many derivative businesses, now is the time to let these desks flex their muscles.
Happy hunting,
Andy
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