Rational pricing underpins the logic of swap valuation. Here, two counterparties "swap" obligations, effectively exchanging cash flow streams calculated against a notional principal amount, and the value of the swap is the present value (PV) of both sets of future cash flows "netted off" against each other. To be arbitrage free, the terms of a swap contract are such that, initially, the "Net" present value of these future cash flows is equal to zero; see Swap (finance) #Valuation and Pricing. Once traded, swaps can (must) also be priced using rational pricing. The examples below are for Interest rate swaps and is representative of pure rational pricing as it excludes credit risk although the principle applies to any type of swap.