For the calculation of CVA and DVA for netting groups, you can also use the calculation method Based on Expected Exposures
. With this method, the system calculates the riskfree NPV on the basis of the riskfree yield curve that is assigned in the relevant evaluation type for the transactions of the netting group.
Firstly, the system calculates the CVA and DVA separately for the netting group. The expected exposures (EEs) of the transactions of the netting group (NG) for a set of future dates are either calculated and aggregated for each date for the EE_{NG} or, in the case of manual entries, read from the EE table. The expected exposures are then weighted with the product of default probability (AWKT) and loss given default (LGD).
Using allocation, the system distributes the CVA and the DVA of the netting group across the transactions of the netting group, and stores the results in the NPV table.
Technical Name of the Product Feature  TRM_CVA_EE_NG 

The product feature is  New 
Country Dependency  Valid for all countries 
Software Component Version 

Application Component  FINFSCMTRMMR 
Available as of  SAP enhancement package 7 (Support Package 07) for SAP ERP 6.0 
Prerequisite Business Functions 

CVA and DVA values are calculated using the following equations:
where
LGD = loss given default
D = discount factor
t = time
EPE = expected positive exposure
ENE= expected negative exposure
AWKT = default probability
C in subscript = business partner
I in subscript = your own company
EPE and CVA are positive
ENE and DVA are negative
The calculation of credit and debit value adjustments requires the credit spread curve for the reference entity of either the business partner or of your own company in order to obtain the product AWKT*LGD as follows:
LGD*AWKT (t_{i1}, t_{i}) = CS (t_{i})*(t_{i}  t_{0})  CS (t_{i1})*(t_{i1}  t_{0})
See also: Deriving Credit Spread Curves
The calculation produces the CVA_{NG} and the DVA_{NG}.
Using allocation, the system distributes the CVA and the DVA of the netting group across the individual transactions of the netting group. (This produces for each transaction of the netting group the CVA_{EG} and the DVA_{EG} respectively.)
The relevant NPV of the transactions of the netting group is obtained using the following equation:
Riskfree NPV_{EG}  CVA_{EG}  DVA_{EG} = NPV_{EG}
The results are stored at transaction level in the NPV table. By choosing the CVA/DVA Calculation
pushbutton, you can also display the results for the netting group in the NPV table.
You calculate NPVs with inclusion of CVA and DVA by using the function Determine NPVs Including CVA and DVA (transaction TPM60CVA
).
The system performs the calculation in the currency that you specify in the function. If you do not specify a currency, the system calculates the expected exposures as well as CVA_{NG}/DVA_{NG} in the currency of the netting group. After the results have been saved in the NPV table, the final, postallocation results for each transaction are translated into the position currencies of that transaction.
The results at the level of the financial transactions are stored in the NPV table (table VTVBAR
, transaction JBNPV
).