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Working on a derivative transaction

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Reference no: EM133075026

You are working in the XVA team at b Bank and the Sales team are working on a derivative transaction with the following details:

-Face Value of A$150m

-Term 10 years, no amortisation

-Client Pays Fixed Rate at market, receives BBSW

-Corporate counterparty, uncollateralised.

-No other deals with the counterparty

-Product AUD Interest Rate Swap

You are asked to consider the XVA adjustments which might be required for the transaction. . If these costs were assessed and included in the price the counterparty paid do you think they are pure profit? Why?

Reference no: EM133075026

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