In the preceding article of this series, “Part I: CVA - Lessons and Outcomes from the Financial Credit Crisis”, we presented a brief introduction to the meaning of credit value adjustment (CVA). The article explained how banks' usage of CVA can be categorised, and described it within various different regulatory contexts.

In this article we will expand the concept of CVA by presenting different cases where the investor is seen as either risk-free or risky. We will then present four different CVA pricing frameworks and discuss their level of sophistication.