Modeling credit value adjustment with downgrade-triggered termination clause using a ruin theoretic approach

► A commonly used measure of counterparty risk is the credit value adjustment (CVA). ► The paper addresses the modeling of CVA with downgrade-triggered termination clause. ► We provide solutions to various probabilities of default in a jump-diffusion model. ► Our algorithm for computing CVA with downgrade trigger proves to be very efficient. ► The paper presents a novel application of ruin techniques for credit risk management.