If an FI is a counterparty to a swap arrangement, it must record the notational value of the swap as the market value.

Question

Quizplus · Accepted Answer

The notational value of a swap reflects the face value of the agreement and does not represent the current market value of the swap. The market value of a swap is determined by the current interest rate environment and other relevant market factors. Therefore, an FI would record the current market value of the swap, not the notational value.

If an FI Is a Counterparty to a Swap Arrangement