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

This is true. Interest rate swaps are not exchange traded and therefore there is a risk of default by the counterparty. The risk can be minimized through credit analysis and setting up collateral or margin requirements.

A Limitation of Interest Rate Swaps Is That There Is