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How is bilateral credit risk measured on an uncleared swap? What are CVA and DVA?
Bilateral risk: V_risky = V_riskfree - CVA + DVA. Brindle Energy's swap with Korvis Bank: CVA of $0.38M offset by DVA of $0.52M produces +$0.14M net adjustment...
How does graded vesting differ from cliff vesting for stock-based compensation expense recognition?
Graded vesting means tranches vest separately over time while cliff vesting means the entire grant vests at a single date. The accounting treatment diverges based on how you allocate fair value.
How are interest rate futures priced and what drives the futures-spot relationship?
Interest rate futures are priced using a cost-of-carry framework adapted for debt instruments. For a T-bill futures contract, the theoretical price equals the spot price compounded at the repo rate minus any coupon income earned during the carry period.
Walk me through the full mark-to-market swap valuation process.
MTM valuation: build OIS curve, project floating CFs, discount both legs, net. Morven's $75M pay-fixed swap shows +$0.53M value posted as variation margin daily...
How do I calculate the termination value of an interest rate swap before maturity?
Termination value = PV(remaining fixed leg) - PV(remaining floating leg). Example: Lantara Capital's 3.80% receive-fixed swap unwinds at $1.27M gain when rates fall to 2.90%...
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