Reading 63: Swap Markets and Contracts-LOS i 习题精选 potential, 2011, class, between, current

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Session 17: Derivative Investments: Options, Swaps, and Interest Rate and Credit Derivatives
Reading 63: Swap Markets and Contracts

LOS i: Evaluate swap credit risk for each party and during the life of the swap, distinguish between current credit risk and potential credit risk, and illustrate how swap credit risk is reduced by both netting and marking to market.

 

 

Current and potential credit risk in a swap are:

A) not equal at the inception of the swap.

B) equal at all times over the term of a swap.

C) greatest between payment dates.

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Current credit risk is the risk of not receiving a payment currently due, since there is none at the inception of the swap, current credit risk is zero. Potential credit risk is the risk that payments possibly due in the future will not be made.

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Compared to an equity swap, a currency swap has credit risk that is:

A) greater, later in the swap.

B) greater, earlier in the swap.

C) approximately the same during the life of the swap.

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A currency swap has a final exchange of principal, moving the maximum credit risk later in the life of the swap.

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The credit risk of an interest-rate swap is greatest:

A) just before the final payment must be made.

B) late in the term.

C) at the middle of the term.

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The credit risk in an interest-rate swap is greatest at the middle of the swap.

jiangminghu03

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