The credit valuation adjustment (CVA) framework is designed for OTC derivatives. These harbour not only market risk, but also credit risk. A deterioration in the credit quality of the derivative counterparty has a negative effect on the value of the derivative.

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Statutory basis, implementation provisions, Bundesbank notices and circulars

In accordance with the provisions of the Solvency Regulation, two different approaches are used to quantify credit and counterparty credit risk, the Credit Risk Standardised Approach and the Internal Ratings-Based Approach.