Should we record market values on swaps according to Nordkap, from another external source, or based on the banks' own valuations?
Market valuations are very momentary, and a swap with the same terms can differ in valuation between tools and also between banks. Just as it can vary in price when entering into a swap. However, you should feel confident in understanding what this difference can be attributed to and how much it can differ at most.
Nordkap uses the mid-price from banks for market valuation at the closing on the day you choose.
The price between banks, however, can vary, as they take into account their bid/offer spreads at the time. This means that it can vary between banks and against the mid-price.
Banks also take the closing rate at different times, where, for example, Nordea waits for the closing of the euro market before valuing, while Swedish banks value after the Swedish closing.
This means that it is normal for the valuation to differ by up to 1.5 and sometimes 2 basis points for a swap valuation between banks, and this difference is thus also accepted for the valuation.
Also, be aware of whether the bank's valuation shows including or excluding accrued interest in the market value report; this can also vary between banks. In Nordkap, we show excluding accrued interest because the accrued interest component is reported separately in the report/accounting of accrued interest.
Which method you choose is largely a discussion with the auditor; some customers have accounting requirements to perform their own valuations with the same method for swaps in different banks and use Nordkap for that