be shown that: P S S par par MVA 100 / ⋅ = Where S MVA is the MVA swap spread, S par/par is the par/par swap spread and P is the dirt y price of the bond. A simple demonstration of this is shown in the appendi x. Collateralisation <span>The MVA swap does reduce the problems with collateralisation in one important respect. The off-market swap must be worth the same as the present value of the difference between the bon d’s price and par pai d at the maturity of the bond. As a consequence, the ‘loan’ will be for a smaller amount and the s wap spread will be smaller (if the bond trades above par). This is the intuition f or the above relationship between par/par spreads and MVA spreads. Monitoring an MVA Swap The performance of an MVA transaction is difficult to monito r becau
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