Which of the following statements regarding a cross-currency swap is incorrect?
A) There is an exchange of principal amounts between counterparties at the beginning and end of the swap.
B) The re-exchange at the conclusion of a cross-currency swap usually takes place at the initial exchange rate.
C) As the cross-currency swap is arranged through a bank, there is no credit risk.
D) Once the cross-currency swap rate is determined, cash flows are known with certainty.

Question

Quizplus · Accepted Answer

Cross-currency swaps do carry credit risk, as both parties are exposed to the credit risk of the counterparty, and the risk of exchange controls and nationalization. Therefore, statement C is incorrect. A, B, and D are correct.

Which of the Following Statements Regarding a Cross-Currency Swap Is