If the counterparty goes bankrupt, the side with a positive market value loses that value, while the side with a negative market value loses nothing. Current exposure is therefore the larger of the market value and zero. It is also called replacement cost and may be reported either before or after deducting collateral.
Consider a hypothetical example of an interest rate swap entered at the par rate. Its market value is zero at inception, so its current exposure is also zero. If the value rises to 200 million yen a year later, the current exposure is 200 million yen; if it falls to −300 million yen, the current exposure is zero.
Current exposure shows only today's amount and does not include future changes in value. Future amounts are measured with potential future exposure and expected exposure.