The counterpart of CVA that reflects the firm's own default risk, which reduces the value of its liabilities. Recording a gain when its own credit worsens is controversial.
Where you will meet it
Debit valuation adjustment comes up in 7 learning outcome notes across the FRM syllabus.
A few of them:
Credit Risk FRM Part II · Credit risk measurement and management
“Debt valuation adjustment (DVA) is the mirror image.”
Counterparty Risk and Beyond FRM Part II · Credit risk measurement and management
“DVA is the benefit from the dealer's own possible default, because it would not pay its liabilities in full.”
CVA FRM Part II · Credit risk measurement and management
“Debit (debt) value adjustment, DVA, is the value to the institution of the possibility that it defaults on what it owes.”
CVA FRM Part II · Credit risk measurement and management
“Unilateral DVA (UDVA) assumes only the institution can default and the counterparty is default free.”
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