Company X and company Y have mirror-image financing needs (they both want to borrow equivalent amounts for the same amount of time. Company X has a AAA credit rating, but company Y's credit standing is considerably lower.
A)Company X should demand most of the QSD in any swap with Y as compensation for default risk.
B)Since Y has a poor credit rating, it would not be a participant in the swap market.
C)Company X should more readily agree to a swap involving Y if there is also a swap bank providing credit risk intermediation.
D)both a and c

Question

Quizplus · Accepted Answer

Company X should demand most of the QSD to compensate for the higher default risk of company Y. Additionally, the presence of a swap bank providing credit risk intermediation would make Company X more willing to engage in a swap with Company Y.

Company X and Company Y Have Mirror-Image Financing Needs (They