A limitation of interest rate swaps is that there is a risk to each swap participant that the counterparticipant could default on his payments.

Question

Quizplus · Accepted Answer

Interest rate swaps involve a high level of credit risk, and there is always a chance that one of the parties may be unable to fulfill their obligations. This risk is especially significant for the party receiving fixed payments, as they may be exposing themselves to potential losses if the other party defaults on their payments.

A Limitation of Interest Rate Swaps Is That There Is