1.Explain how the use of derivative contracts, such as forwards, futures, swaps and options creates contingent credit...

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1.Explain how the use of derivative contracts, such as forwards, futures, swaps and options creates contingent credit risk for an FI. Why do OTC contracts carry more contingent credit risk than do exchange-traded contracts? How is the default risk of OTC contracts related to the time to maturity and the price and rate volatilities of the underlying assets? LO 16.3 , 16.4

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