Why is the expected loss to a bank from a default on a swap with a counterparty
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Why is the expected loss to a bank from a default on a swap with a counterparty less than the expected loss from the default on a loan to the counterparty when the loan and swap have the same principal? Assume that there are no other derivatives transactions between the bank and the counterparty, that the swap is cleared bilaterally, and that no collateral is provided by the counterparty in the case of either the swap or the loan.
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Related Book For
Fundamentals Of Futures And Options Markets
ISBN: 9781292422114
9th Global Edition
Authors: John Hull
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