24-71 The credit risk on swaps is considered to be
A)more than the credit risk on loans.
B)less than the credit risk on loans.
C)same as the credit risk on loans.
D)is negligible compared to the credit risk on loans.
E)less likely to cause an FI to fail than is interest rate risk.

Question

Quizplus · Accepted Answer

The credit risk on swaps is generally considered to be less than the credit risk on loans, as swaps typically involve counterparties with strong credit ratings and collateral requirements. The credit risk on loans, on the other hand, can vary depending on the creditworthiness of the borrower and the quality of the collateral. However, swaps can still pose a significant credit risk if the counterparty defaults or if market conditions change dramatically.

24-71 the Credit Risk on Swaps Is Considered to Be