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

question 20

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.

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Definitions:

Hypothesis

A testable prediction about the conditions under which a particular behavior or mental process may occur.

Negative Correlation

An association between two variables characterized by the increase of one variable leading to the decrease of the other, and the opposite is also true.

Inverse Relationship

An inverse relationship is a correlation between two variables where one variable increases as the other decreases, and vice versa.

Expectation of Drinking

The anticipation or belief about the effects that alcohol will have, which can influence an individual's drinking behavior and experience.