Funding and Collateral The execution of a par/par tra de also involves some complications. The most important of these, in our view, is that the large upfront payment leads to the questio n of the correct funding charge to apply. <span>Because the swap and the sale of the bo nd are not independent transactions, to model the spre ad fairly, we need to understand the financing co st of the upfront payment. This will depend on the coll ateral agreements in place with each counterparty. The distortion due to a n inappropriate assumption on the funding can be ver y substantial where a b
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