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.

Question

Quizplus · Accepted Answer

The netting process involves combining multiple swap contracts and offsetting the positive and negative amounts to reduce overall credit risk. This helps to decrease or mitigate credit risk on swaps.

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