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MVA asset swap
#asset-swap #finance #gale-using-and-tradning-asset-swaps
Swap notional is bond dirty price at settlement.
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owner: piotr.wasik - Using and Trading Asset Swaps - Giles Gale (Morgan Stanley), p3

– Bond DP MVA = [Par/Par]*100 / [bond DP] Trade: Bond bought for dirty price, plus a swap. Swap fixed schedule matches bond coupons. Fee of [Settlement DP] -100 paid to ASW buyer at expiry. Floating schedule is [Libor + spread]. <span>Notional is bond dirty price at settlement. For given bond price, the MVA swap spread falls as the swaps curve steepens. MVA spread rises as yields rise. Trade is not duration neutral. P&L is not easily approximated



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