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Explain why a bank is subject to credit risk when it enters into two offsetting swap contracts.

Questions and AnswersPosted On:2023-08-10 11:24:00Viewed:154

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Explain why a bank is subject to credit risk when it enters into two offsetting swap contracts.

Bank

A necessary type of financial institution that plays a vital role in the nation's economic development by borrowing and withdrawing money from the customers is known as a bank. A bank helps the customers to fulfill all the financial and banking requirements.


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Bank suffers credit risk when entering

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and the value of the other exchange is negative. When the opposite party in the contract has a positive value for swap bank may have credit risk and the chance of losing the funds.


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