If an otc swap has a non zero value to begin with but the sum total of all the swaps has a zero value.
What’s the point of entering into a swap when nobody is gaining or losing at the end?
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Initial Price should be such there should not exist any arbitrage opportunity (Value of fixed=Value of floating)but as time passes and floating rate changes, One loses while the other gains(Net payment on settlement dates)
So then what’s the point and of saying that on the whole the value is Zero. If someone gains and someone loses.. i cant relate to this
Swap is initially priced in such a manner that the value is equal to 0 however in a swap we knew about the first payment. but the total combination as on 1st day make it clear that there is no arbitrage opportunity.