A Total Return Credit Swap

question 37

Multiple Choice

A total return credit swap

• A)can allow an FI to maintain long-term customer lending relationships without bearing the full credit risk exposure from these relationships.
• B)involves exchanging an obligation to pay interest at a specified rate for payments representing the total return on a loan of a specified amount.
• C)can be important because credit risk is more likely to cause an FI to fail than either interest rate risk or FX risk.
• D)All of the options.
• E)can allow an FI to maintain long-term customer lending relationships without bearing the full credit risk exposure from these relationships and can be important because credit risk is more likely to cause an FI to fail than either interest rate risk or FX risk.

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Definitions:

Terminate Offers

The process of ending an offer before it is accepted, which can occur for various reasons, including by actions of the parties or lapse of time.

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