There is risk that a firm involved in an interest rate swap may not meet its payment obligations; this risk is called systemic risk.

Question

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Systemic risk refers to the risk that the entire financial system may be affected by the failure of one entity or a group of entities, not the risk of one firm involved in an interest rate swap not meeting its payment obligations. The specific risk of a firm not meeting its payment obligations in an interest rate swap is called credit risk.

There Is Risk That a Firm Involved in an Interest