BASEL REFORMS

This session focuses on Reference Credit Spread Vega (RCSVG), which measures the sensitivity of CVA to changes in the volatility of credit spreads for reference entities in credit derivatives. Unlike Counterparty Credit Spread Delta (which has no vega component), RCSVG captures the option-like characteristics of credit exposure, as volatility in reference credit spreads directly affects the potential future exposure in Monte Carlo simulations.

This session focuses on Foreign Exchange Vega (FXVG), which measures the sensitivity of CVA to changes in FX implied volatility. FXVG captures the volatility risk arising from FX options and other derivatives with exposure to FX volatility.

This session focuses on Interest Rate Vega (IRVG), which measures the sensitivity of CVA to changes in interest rate option volatilities. IRVG captures volatility risk, addressing how changes in implied volatilities affect the pricing of swaptions and other interest rate derivatives commonly used in CVA hedging strategies.