I get the same PV= 99.75 when N=1, I/Y=2, PMT=1.75, FV=100.
Shouldn’t we add another Coupon payment to the newly calculated PV when solving for Exposure? Or do we not add a Coupon payment to the calculated PV when solving for Exposure at t-zero?
I get the same PV= 99.75 when N=1, I/Y=2, PMT=1.75, FV=100.
Upon further thought, the Estimated Exposure at t-zero contains the first period’s coupon payment. That same payment has been lumped with the principal and discounted to a PV at t-zero.
When calculating the Estimated Exposure at t-one, you would add the second period’s coupon payment (not discounted) to the PV at t-one.
Am I correct?
At time 1, PV=FV=101.75. No need for discounting!!
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