What is the exact details of swap option whose PV gives the counterparty exposure at horizon of t=15months for a payer swap of strike 1% above ATM and length 5y starting at 2y?
What you are describing is a payer swaption expiring in 15 months, with the strike being 1% above the current at the money forward swap rate for a forward starting swap where the swap starts 2yrs from now and ends 7 years from now (a 5 year forward starting swap).
The buyer of the payer swaption will exercise the swaption if at maturity in 15 months, the forward swap rate for a 5 year swap starting in 9 months and ending in 5years and 9 months is greater than the strike agreed on trade date. The terms of the underlying swap agreed to at trade date rolls down during the term of the swaption.
If exercised, they will enter into a forward starting swap where they will pay fixed strike rate (semi annually) and receive the floating rate (3M Libor) starting in 0.75 years and ending in 5.75 years from exercise date. Alternatively this can be cash settled at exercise for the then PV of that swap.
The counter party exposure is the value of that option if you are the buyer.