For a bank, what has a higher credit risk: a $100 million loan or a $100 million interest rate swap?
What will be an ideal response?
For a bank, a $100 million loan has the higher risk because both the principal and the stream of interest receipts are at risk. In an interest rate swap, the principal is not at risk because nothing is lent or borrowed and only the interest differential (i.e., the difference between the interest received and paid) is at risk.
Business
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An incidental beneficiary has no rights to enforce or sue under other people's contracts
Indicate whether the statement is true or false
Business
The movement of money from lender to borrower and back again is known as ________
A) the circle of life B) corporate finance C) the cycle of money D) money laundering
Business