A major risk faced by a swap dealer is mismatch risk. This is
A)the probability floating rates and exchange rates will NOT move together.
B)the difficulty in finding a second counterparty for a swap that the bank has agreed to take with another party.
C)the probability that both counterparties default.
D)none of the above

Question

Quizplus · Accepted Answer

Mismatch risk for a swap dealer refers to the challenge of finding a second counterparty to offset the swap position taken with the first counterparty, leading to potential exposure if the terms do not align perfectly.

A Major Risk Faced by a Swap Dealer Is Mismatch