  Bilateral CVA as currently implement has the counterintuitive effect of
profiting from one's own widening CDS spreads, i.e. increased risk of default,
in practice. The unified picture of CVA and liquidity introduced by Morini &
Prampolini 2010 has contributed to understanding this. However, there are two
significant omissions for practical implementation that come from the same
source, i.e. positions not booked in usual position-keeping systems. The first
omission is firm-level positions that change value upon firm default. An
example is Goodwill which is a line item on balance sheets and typically
written down to zero on default. Another example would be firm Equity. The
second omission relates to collateralized positions. When these positions are
out of the money in future, which has a positive probability, they will require
funding that cannot be secured using the position itself. These contingent
future funding positions are usually not booked in any position-keeping system.
We show here how to include these two types of positions and thus help to
complete the unified picture of CVA and liquidity.
  For a particular large complex financial institution that profited $2.5B from
spread widening we show that including Goodwill would have resulted in a $4B
loss under conservative assumptions. Whilst we cannot make a similar assessment
for its collateralized derivative portfolio we calculate both the funding costs
and the CVA from own default for a range of swaps and find that CVA was a
positive contribution in the examples.
