DVA — Debit Valuation Adjustment
Computes the DVA (Debit Valuation Adjustment), the mirror image of CVA seen from the other side. While CVA discounts value for the risk of the counterparty failing, DVA recognizes the counterintuitive benefit of the institution's own default risk: if it might not pay its obligations, that effectively reduces the liability. It's the piece that makes derivative pricing symmetric between the two parties. The calculation follows the same structure as CVA, but uses the expected negative exposure and the own default probability. Enter the exposure and credit data.
Result
—
DVA — Debit Valuation Adjustment
Computes the DVA (Debit Valuation Adjustment), the mirror image of CVA seen from the other side. While CVA discounts value for the risk of the counterparty failing, DVA recognizes the counterintuitive benefit of the institution's own default risk: if it might not pay its obligations, that effectively reduces the liability. It's the piece that makes derivative pricing symmetric between the two parties. The calculation follows the same structure as CVA, but uses the expected negative exposure and the own default probability. Enter the exposure and credit data.
The near side of credit risk
CVA looks outward: how much the risk of the counterparty failing costs. DVA asks the mirror-image, uncomfortable question: what about the risk of the institution itself defaulting? As strange as it sounds, that risk generates an accounting benefit. If you might not pay your obligations, the present value of what you owe decreases.
This adjustment is what makes pricing symmetric between the two ends of a derivative. One party's CVA is, in essence, the other's DVA: what for one is the fear of not being paid, for the other is the benefit of maybe not paying. The calculation follows exactly the same structure as CVA, but uses the expected negative exposure and the institution's own default probability.
Enter the expected negative exposures per period, the own hazard rate, the recovery and the discount. The tool returns the DVA. Controversial for letting a bank book gains when its own credit health worsens, DVA is nonetheless an integral part of the fair-value accounting of derivatives within the XVA framework.
Related Tools
CVA — Credit Valuation Adjustment
Computes the CVA (Credit Valuation Adjustment), the discount applied to a derivative's value to reflect the risk of the counterparty defaulting. After the 2008 crisis, it became central to pricing: the market value of a swap or option is no longer the risk-free theoretical one, but that value minus the CVA. The calculation sums, period by period, the expected exposure times the default probability, discounted to present value and adjusted by the loss given default. Enter the expected exposures, the hazard rate, the recovery and the discount.
CDS Par Spread (Reduced-Form)
Computes the par (breakeven) spread of a Credit Default Swap in the reduced-form model with a constant hazard rate, setting the present value of the protection leg — which pays 1−R on default — equal to that of the premium leg. It shows the credit-triangle relationship s ≈ (1−R)·λ in practice. Enter the hazard rate, recovery rate, maturity, payment frequency and risk-free rate; the result is in basis points.
Bull Put Spread
Computes the outcome of a bull put spread: selling a higher-strike put and buying a lower-strike put, collecting a credit. It's a bullish (or neutral) bet that pockets the premium with risk capped by the bought put. The tool returns the credit received (maximum profit), the maximum loss and the breakeven. Enter the two strikes and the respective put premiums.
Box Spread (Arbitrage)
Computes the fair value and arbitrage of a box spread: combining a call spread and a put spread at the same strikes, creating a fixed payoff of (Kh − Kl) at expiry, equivalent to a riskless bond. The fair value is that payoff discounted: (Kh − Kl)·e^(−rT). If you set up the box for less than that, you lock in a risk-free profit. The tool returns the payoff, the fair value and the arbitrage against the cost you enter. Enter the two strikes, the rate, the term and the cost.
Iron Butterfly
Computes the outcome of an iron butterfly: selling a call and a put at the same central strike (the body) and buying a further-out call and put (the wings), collecting a net credit. It's a strong bet that the asset will finish right at the central strike, with a bigger credit than an iron condor but a narrower profit range. The tool returns the maximum profit, the maximum loss and the two breakeven points. Enter the central strike, the wing width and the credit received.
Spread Duration (Numerical)
Computes the spread duration of a bond by finite differences, repricing the instrument for an up and a down move in the credit spread: (V− − V+)/(2·V0·Δs). While duration measures sensitivity to changes in the risk-free rate, spread duration isolates sensitivity to the credit spread, the premium the market charges for issuer risk. It's essential for managing credit portfolios, where spread risk often dominates. Enter the base price, the prices with higher and lower spread and the spread change used.
The results provided by this tool are for general informational and educational purposes only and do not constitute professional, financial, medical, legal, tax or accounting advice. Always confirm important decisions with a qualified professional and official sources.