The first edition of this book was published about a decade ago in the aftermath of a global financial crisis and focused on the importance of counterparty credit. Since then, the area of counterparty credit risk has broadened to consider the importance of related aspects such as collateral, funding, capital, and initial margin. This area has continued to see rapid change due to regulation, accounting standards, and evolving market practice. As previously, this is much more than a new edition because most of the content has been rewritten and expanded significantly.
I hope this book can be used as a comprehensive and relatively non-mathematical reference for the subject we now generally refer to as xVA. There are other mathematical books on this subject and the book by Andrew Green (Green 2015) is recommended as a comprehensive quantitative guide to the subject.
As with previous editions, I have saved space by putting mathematical appendices together with accompanying spreadsheets on my personal website at www.cvacentral.com. Since many do not study this material in depth, this has proved to be a reasonable compromise for most readers. There is also a list of errata that can be found on this website.
I have also made use of numerous survey results and I am grateful to Solum Financial and Deloitte for allowing me to reproduce these. I am also grateful to IBM and IHS Markit who have provided calculation examples in previous editions, some of which are used here. These will all be mentioned in the text.
Finally, I would like to thank the following people for feedback on this and earlier editions of the book: Manuel Ballester, Teimuraz Barbakadze, Ronnie Barnes, Raymond Cheng, Vladimir Cheremisin, Michael Clayton, Andrew Cooke, Christian Crispoldi, Daniel Dickler, Wei-Ming Feng, Julia Fernald, Leonard Fichte, Piero Foscari, Teddy Fredaigues, Sayoko Fujisawa, Naoyuki Fujita, Shota Fukamizu, Dimitrios Giannoulis, Glen Gibson, Sergej Goriatchev, Arthur Guerin, Kazuhisa Hirota, Kale Kakhiani, Toshiyuki Kitano, Henry Kwon, Edvin Lundstrom, David Mengle, Richard Morrin, Ivan Pomarico, Yufi Pak, Hans-Werner Pfaff, Francesco Ivan Pomarico, Erik van Raaij, Kei Sagami, Guilherme Sanches, Neil Schofield, Andreas Schwaderlapp, Florent Serre, Masum Shaikh, Ana Sousa, Salvatore Stefanelli, Richard Stratford, Carlos Sterling, Norikazu Takei, Hidetoshi Tanimura, Todd Tauzer, Satoshi Terakado, Nick Vause, Frederic Vrins, Nana Yamada, and Valter Yoshida.
Jon Gregory
December 2019