Which of the Following Is True of the "Netting" Process

question 95

Multiple Choice

Which of the following is true of the "netting" process in the swap market?

• A)It decreases or mitigates the credit risk on swaps.
• B)Both parties make payments to each other as a consequence.
• C)It implies that the default exposure of the in-the-money party is the total fixed or floating payment.
• D)It does not happen across contracts.
• E)Netting by novation increases the potential risk of loss.