Paper long abstract:

If finance solves problems, what types of problems does it solve? The proliferation of new financial markets and market devices over the past several decades has often been explained on the grounds that they efficiently solve certain macro-level economic problems, most notably the allocation and sharing of risk between market actors. Yet a classic theme of STS research has been that even the most universal' forms of knowledge tend to reflect the local conditions of their production. Moreover, they are often developed to address highly localised organisational and political conflicts that often bear little resemblance to the 'global' problems that they are eventually employed to solve. Drawing on interview data and an analysis of a large corpus of technical documents, this paper presents a historical sociology of a market device known as the 'credit valuation adjustment' (CVA). A bank's CVA represents a reduction in the market value of its assets to account for changes in the credit worthiness of its trading partners, and its use is now mandated by global accounting standards and enshrined in bank capital rules. While CVA is now used as a technology to monitor and govern the actions of banks, it was originally developed in the 1990s as a market-based solution to 'depoliticise' a set of contentious conflicts between two groups of actors within banks: credit officers and derivatives traders. I trace out why CVA emerged as a solution to these conflicts, and how it eventually came to be used to govern banks themselves.