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On August 15, 2021, Bank A enters into a swap agreement with Bank B, where Bank A agrees to receive the ongoing market rate (floating
On August 15, 2021, Bank A enters into a swap agreement with Bank B, where Bank A agrees to receive the ongoing market rate (floating leg, LIBOR) in the future (2023 to 2028), and pay an agreed fixed rate. If the interest rates drop to lower levels than expected in the future (due to further Quantitative Easing), what happens to the Credit Exposure of Bank A due to this transaction?
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