The credit risk on swaps is considered to be
A)more than the credit risk on loans.
B)less than the credit risk on loans.
C)same as the credit risk on loans.
D)is negligible compared to the credit risk on loans.
E)less likely to cause an FI to fail than is interest rate risk.

Question

Quizplus · Accepted Answer

The credit risk on swaps is generally considered to be less than the credit risk on loans, as the counterparties involved are typically large financial institutions with strong credit ratings. Additionally, most swaps are collateralized, which further reduces credit risk.

The Credit Risk on Swaps Is Considered to Be