How To Fix FTBCVA067 - Purchased option &1: CVA is restricted to risk-free NPV

SAP Error Message - Details

• Message type: E = Error

• Message class: FTBCVA - Credit Value Adjustment

• Message number: 067

• Message text: Purchased option &1: CVA is restricted to risk-free NPV

Self-Explanatory Message

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Smart SAP Assistant

• What is the cause and solution for SAP error message FTBCVA067 - Purchased option &1: CVA is restricted to risk-free NPV ?

  The SAP error message FTBCVA067 indicates that there is a restriction on the Credit Valuation Adjustment (CVA) for a purchased option, specifically that the CVA is limited to the risk-free Net Present Value (NPV). This error typically arises in the context of financial instruments and risk management within SAP's Treasury and Risk Management module.
  Cause:
  
  CVA Calculation Restrictions: The system is set up to restrict the CVA for certain financial instruments, such as purchased options, to ensure that the calculated CVA does not exceed the risk-free NPV. This is a risk management measure to prevent overestimation of credit risk.
  Configuration Settings: The error may be due to specific configuration settings in the SAP system that dictate how CVA is calculated and what limits are applied.
  Data Issues: There may be issues with the data associated with the financial instrument, such as incorrect valuation parameters or missing information.
  
  Solution:
  
  Review Configuration: Check the configuration settings related to CVA in the SAP system. Ensure that the settings align with your organization's risk management policies and that they are correctly set up for the financial instruments you are using.
  Validate Data: Ensure that all relevant data for the purchased option is correctly entered and complete. This includes checking the valuation parameters, market data, and any other inputs that may affect the CVA calculation.
  Adjust CVA Limits: If appropriate, consider adjusting the limits for CVA calculations in your system. This may involve discussions with your risk management team to ensure that any changes align with your organization's risk appetite.
  Consult Documentation: Refer to SAP documentation or help resources for specific guidance on handling CVA calculations and related error messages. This can provide insights into best practices and configuration options.
  Contact SAP Support: If the issue persists after reviewing configuration and data, consider reaching out to SAP support for assistance. They can provide more detailed troubleshooting based on your specific system setup.
  
  Related Information:
  
  CVA (Credit Valuation Adjustment): CVA is a risk management tool that quantifies the risk of counterparty default in derivative transactions. It adjusts the valuation of derivatives to account for the possibility of counterparty default.
  Risk-Free NPV: The risk-free NPV is the present value of expected cash flows from a financial instrument, discounted at a risk-free rate. It serves as a benchmark for assessing the value of financial instruments without credit risk.
  SAP Treasury and Risk Management: This module provides tools for managing financial risks, including market risk, credit risk, and liquidity risk. Understanding how these tools work can help in resolving related issues.
  
  By following these steps and understanding the underlying concepts, you should be able to address the FTBCVA067 error effectively.