Contingent Credit Risk Occurs with the Use of Derivative Products

question 77

True/False

Contingent credit risk occurs with the use of derivative products and involves the potential default by a counterparty.

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Definitions:

Discharged

Released from liability for a negotiable instrument.

Negotiable Instrument

A written, transferable document signed by the maker or drawer, containing an unconditional promise or order to pay a specified amount of money on demand or at a set time.

Material Alteration

A significant change or modification to a document or item that changes its legal effectiveness or meaning.

Holder In Due Course

A person who has acquired a negotiable instrument in good faith for value and without notice of any defects.