In light of recent downgrades in their credit ratings and the stability of the 6-month LIBOR curve, if HIP Bank (HIP) and ADB Banking Corporation (ADB) were to initiate a new 3-year interest rate swap agreement under the same conditions as their previous arrangement, which of the following statements would most accurately reflect the situation?

Exam-Like

Since HIP's spread increased more than ADB's spread, HIP's DVA will increase and ADB's DVA will decrease.

10.0%

Since HIP's spread increased more than ADB's spread, HIP's CVA will increase and ADB's CVA will decrease.

7.1%

Since both banks' spreads increased, the CVA on both sides of the contract will be higher.

78.6%

Since both banks' spreads increased, the DVA on both sides of the contract will be lower.

4.3%

Financial Risk Manager Part 2