A counterparty-risk engine can correctly price default shortfalls while leaving the funding and capital economics of a trade unspecified. Adding more adjustment labels to its report does not supply those missing cash flows. This lesson closes the current programme by stating what its CVA engine establishes, identifying the evidence needed for a broader xVA course, and testing whether a proposed extension is actually supported.
Learning objectives. By the end of this note you should be able to:
- state the exact boundary of the available credit-adjustment model;
- identify which additional source and specification a proposed extension needs;
- distinguish a validated restricted model from an incomplete broader claim;
- prepare a resource request without inventing an unsupported pricing formula.
In this lesson
- What is already established
- Why the missing extension cannot be a percentage overlay
- Source acquisition map
- Prepare a specification that can be reviewed
- Reuse the computational work responsibly
Before you start
The full lesson, with worked examples and exercise solutions, is for members.
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