I am looking at using the swaption method to calculate the EPE and ENE on a swap over its life, to use in CVA/DVA calculations.

I have a number of questions, how well does this method work in comparison to IR simulations?

Secondly, how exactly does one implement this method? In particular, how does on treat the payment that has already fixed?


1 Answer 1


You might want to refer to this blog page. I didn't know the swap method but what is described at this link seems a good approximation. Of course you will need quite a lot of inputs. The problem of the libor that has already fixed is treated too.



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