Hi, Mr. Harper, the following is a netting question from 2016 practice exam Q52,
I understand the 33mn can be netted off, but for the swaptions, the position is positive market value, why is the remaining 21mn is losses to the bank?
Hi @no_ming In this question, the type of instruments don't really matter as the question is giving you the mark-to-market value ("current market value") of the positions. Credit exposure is max(value, 0). So the credit exposure here without netting is 54, but with netting it is only 21:
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