20-110 Counter Party Credit Risk in OBS Contracts

question 14

Multiple Choice

20-110 Counter party credit risk in OBS contracts

• A)is the risk that the counterparty will likely default when he is in the money on a contract position.
• B)refers to the risk that a counterparty will default when suffering large actual or potential losses on its position.
• C)requires the counterparty to return to the market and replace contracts at less favorable terms.
• D)All of the above.
• E)None of the above.

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Definitions:

Net Exports

The value of a country's total exports minus its total imports, representing the net effect of foreign trade on an economy.

Capital Flight

A large and sudden reduction in the demand for assets located in a country

Interest Rate

The percentage of a loan that is applied as interest for the borrower, usually shown as a yearly rate.

Import Quotas

Restrictions set by a government on the quantity of a specific good that can be imported into a country.