oating notional is equal to the dirt y price of the bond. The result is that the counterparty exposure is s witched from one party to the other and the exposure starts low and builds o ver time rather than starting high and reducing. <span>A par/par s wap creates a collateral probl em i mmediately as the s wap starts off-market and the present value declines ov er the life of the agreement. In an MVA swap, however, counterparty exposure is expected to accrue over the l ife of the swap until it is discharged with the payment of the fee at termination of the contract. MVA delays counterparty risk and this can reduce bid-offer spreads. The present value of the payme nt made to bring the bond to par is also smaller because it occurs in the future.
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