Which statement is INCORRECT?
A) Pricing swap default risk is adding a premium on the fixed rate to compensate the receiver of the . fixed payments for the risk arising from the possibility that the other party may default.
B) In practice, counterparties may seek to mitigate risk rather than price it.
C) A common method of mitigating risk is to ration the amount of swaps with any one counterparty.
D) It is not possible to model the magnitude of potential default risk.

Question

Quizplus · Accepted Answer

It is possible to model the magnitude of potential default risk using various financial models and risk assessment tools. These models help in understanding and quantifying the risk associated with defaults, thereby enabling better risk management and decision-making.

Which Statement Is INCORRECT