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    Calculates locally in your browser · CVA and RWA
    Banking / capital

    Credit risk capital calculator

    A derivative or loan carries two different costs: the credit valuation adjustment that the market prices, and the regulatory capital the bank must hold. This calculator computes both from the same exposure, default probability and loss given default, so the two numbers can be compared side by side.

    RatingAcceptableTenor5.0yLGD60%
    CVA
    $528,018
    9.61% cumulative PD
    Risk-weighted assets
    $5,000,000
    50% risk weight
    Capital required
    $400,000
    8.0% of RWA
    Total cost of risk
    $928,018
    CVA plus capital charge
    Risk build-up
    Credit valuation adjustment and the regulatory capital charge.
    $928,018
    Risk build-up
    TermValue
    Exposure$10,000,000
    Cumulative default probability9.61%
    Discount factor0.9159
    CVA$528,018
    Risk weight50%
    RWA$5,000,000
    Capital$400,000

    CVA is a valuation adjustment; capital is a regulatory buffer. Both are costs of the same exposure.

    Inspect the model
    Choose a quick result view, a scaled comparison, or the complete diagnostic set.
    CVA against default probability
    Nearly linear for short tenors; convex for long ones.
    CVA against default probability$0$327.6k$655.1k$982.7k$1310.3k$1637.9k0.0%0.0%0.6%0.6%1.2%1.2%1.8%1.8%2.4%2.4%3.0%3.0%3.6%3.6%4.2%4.2%4.8%4.8%5.4%5.4%6.0%6.0%CVA
    CVA against capital
    Which cost dominates depends on the rating.
    CVA against capital$0$124.6k$249.2k$373.8k$498.4k$623.1kCVACVACapitalCapitalAmount
    Canonical equations
    The exact relationships implemented by this engine.

    LGD × EPE × PD(t) × DF · Flat-exposure approximation.

    exposure × risk weight · Standardised approach.

    RWA × 8% · Basel minimum; buffers sit on top.

    finance methodology

    A clear path from inputs to results.

    A derivative or loan carries two different costs: the credit valuation adjustment that the market prices, and the regulatory capital the bank must hold. This calculator computes both from the same exposure, default probability and loss given default, so the two numbers can be compared side by side.

    Step-by-step methodWorked exampleAssumptions explained

    How to use

    1. Enter the exposure.
    2. Set the default probability and loss given default.
    3. Choose the tenor and discount rate.
    4. Set the risk weight and capital ratio.

    The formula

    CVA≈LGD⋅EPE⋅PD(t)⋅DF,RWA=E⋅RWCVA \approx LGD \cdot EPE \cdot PD(t) \cdot DF, \qquad RWA = E \cdot RW

    Reference: Basel standardised approach; flat-exposure CVA approximation.

    Worked example

    $10M, 2% PD, 60% LGD, 5 years

    Inputs
    • Exposure $10,000,000.
    • PD 2% a year, LGD 60%.
    • 5-year tenor, 3% discount.
    • Risk weight 50%, capital ratio 8%.
    Calculation path
    1. 1

      Cumulative PD: 1 − 0.98⁵ = 9.61%.

    2. 2

      Average discount factor: 0.916.

    3. 3

      CVA: 0.6 × 10M × 9.61% × 0.916 = $528k.

    4. 4

      RWA: 10M × 50% = $5M.

    5. 5

      Capital: $400k at 8%.

    Result

    CVA $528k · RWA $5M · capital $400k.

    Interpreting the result

    CVA and capital measure different things: one is the expected market loss on the position, the other a regulatory buffer for unexpected loss. For a strong credit the capital charge dominates; for a weak one the CVA does. Watching both is how a desk knows whether a trade is priced for its risk.

    Assumptions & limitations

    • Flat exposure profile over the tenor.
    • Standardised risk weights, not internal models.
    • No collateral, netting or wrong-way risk.
    • Capital ratio of 8% before buffers.

    Frequently asked questions

    What is CVA?

    The market value of counterparty credit risk — an adjustment subtracted from the risk-free value.

    Does collateral reduce both?

    Yes, but the mechanics differ between CVA and regulatory capital.

    Why is RWA not equal to exposure?

    The risk weight scales exposure by the credit quality and exposure class.

    Methodology last reviewed 2026-10-21. Results are informational and not financial or engineering advice — see our disclaimer.