At the beginning of the life of the swap,the present values of the two stream of payments of each counterparty is the same.

Question

Quizplus · Accepted Answer

This is true because the whole point of a swap is to exchange payments that have different cash flows. At the beginning of the swap, the present values of the two streams of payments are equal so that there is no upfront payment required. However, as time goes on, the present values may change due to market fluctuations, credit risk, or other factors.

At the Beginning of the Life of the Swap,the Present