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This was originally meant as a comment but was too long to be considered as such. It's all a matter of convention but I would agree with you that there is a sign problem. If you look at it from the perspective of the desk which makes the trade, CVA constitutes a cost (hence a negative amount) which, all other things equal, decreases the overall value of ...


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You should ask more from your counterparty to compensate for the counterparty credit risk that you will assume by entering a trade with it. For an identical trade, the price that you would ask a very risky counterparty to pay should be greater than the one you would ask a very solid counterparty to pay. Regarding the sign it is a matter of preference, you ...


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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 ...


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