In the swap market,which position potentially carries greater risks,broker or dealer?
A)Broker
B)Dealer
C)They are the same swaps,therefore the same risks.
D)none of the options

Question

Quizplus · Accepted Answer

Dealers in the swap market typically take on greater risks than brokers. Dealers buy and sell swaps in large quantities, and as a result, they often hold onto large inventories of swaps. If the market turns against them, they could be left with a significant amount of swaps on their books that are losing value, leading to potential losses. Brokers, on the other hand, simply act as intermediaries between buyers and sellers and do not typically take on significant market risk.

In the Swap Market,which Position Potentially Carries Greater Risks,broker or Dealer