The Risk Owing to a Timing Difference in an Interest

question 27

Multiple Choice

The risk owing to a timing difference in an interest rate swap transaction,when one party defaults on a payment to another before the other realises it,is called:

• A) basis risk.
• B) mismatch risk.
• C) settlement risk.
• D) front-end risk.

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Definitions:

Active Voice

A grammatical voice in which the subject of the sentence performs the action expressed by the verb, often making the sentence clearer and more direct.

Direct Sentences

Direct sentences are clear and straightforward statements that express an idea or instruction without ambiguity.

Vigorous Sentences

Sentences that are constructed with energy and clarity, often using active voice and concrete language to make an impact.

Be Advised

A phrase often used to draw attention to important information, indicating that what follows should be noted carefully.