A type of risk that affects the valuation of a derivative (specifically, credit-value adjustment or CVA). This risk consists of 1) market risk factors such as foreign exchange, interest rate, equity and equity volatility, and 2) credit risk factors that relate to counterparty’s default risk (e.g., CDS spread), and model parameters affecting credit rating (of the counterparty in the derivative transaction).

This risk account for the losses that might arise from changing CVA values in reaction to changes in counterparty credit spreads and market risk factors that impact market prices of derivative instruments.