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Considering a scenario where a 3-year interest rate swap, identical in structure and terms to the previous arrangement between HIP Bank and ADB Banking Corporation, is initiated today, and assuming that the LIBOR curve remains unchanged while both banks have experienced downgrades resulting in increased credit spreads, which of the following statements is most likely accurate?
A
Since HIP's spread increased more than ADB's spread, HIP's DVA will increase and ADB's DVA will decrease.
B
Since HIP's spread increased more than ADB's spread, HIP's CVA will increase and ADB's CVA will decrease.
C
Since both banks' spreads increased, the CVA on both sides of the contract will be higher.
D
Since both banks' spreads increased, the DVA on both sides of the contract will be lower.