4. Risk in interest rate swaps Use the following table to determine which type of swap market risk each example best represents. Example Risk Type The Russell 2000 index is used on a swap and decreases by 0.6 percent over a four-month timeframe, while the interest rates a U.S. bank pays its depositors for funds decrease by 0.2 percent. As a result, the interest rate payments tied to the Russell 2000 do not offset the bank's cost of funds. Community Bank takes dozens of swap positions and guarantees dozens of swaps as an intermediary for parties engaging in swaps. If participants in the swaps that the bank guarantees begin to default and the bank starts having cash flow issues, then it might start defaulting on some of its swap positions. A U.S.-based investor engages in swaps with a French-based company; however, the French government nationalizes the company and decides not to honor the swaps. Grade It Now Save & Continue Continue without saving 4. Risk in interest rate swaps Use the following table to determine which type of swap market risk each example best represents. Example Risk Type The Russell 2000 index is used on a swap and decreases by 0.6 percent over a four-month timeframe, while the interest rates a U.S. bank pays its depositors for funds decrease by 0.2 percent. As a result, the interest rate payments tied to the Russell 2000 do not offset the bank's cost of funds. Community Bank takes dozens of swap positions and guarantees dozens of swaps as an intermediary for parties engaging in swaps. If participants in the swaps that the bank guarantees begin to default and the bank starts having cash flow issues, then it might start defaulting on some of its swap positions. A U.S.-based investor engages in swaps with a French-based company; however, the French government nationalizes the company and decides not to honor the swaps. Grade It Now Save & Continue Continue without saving