SanFranMatt Wrote: ------------------------------------------------------- > mightysparrow Wrote: > -------------------------------------------------- > ----- > > yes, bilateral means two-way. I think the > simple > > answer is in this case the correct one. Only > ONE > > side bears credit risk at any given point in > time. > > > This was a currency swap, so both parties should > have credit risk because they swap the principal. > I put that the statement is incorrect because > North Fork is a middleman and there’s another > party that bears credit risk. But I don’t think the statement said that North Fork was the counterparty, it just said that the credit risk was limited to the North Fork contracts. Does that make a difference?
I don’t remember the first part of the question. But second part regarding put option, i put no credit risk. The strike price is 100JPY/USD. The current spot is 102.5, so the put option is OUT of the money and thus no party bears any credit risk.
Only one party can bear credit risk at any point so bilateral can’t occur simultaneously.
if both parties are due to make a payment then both have credit risk. No netting with currency swaps.
wow dont remember this question, maybe forgot to answer it
Put was a euro call.
cp0821 Wrote: ------------------------------------------------------- > I don’t remember the first part of the question. > But second part regarding put option, i put no > credit risk. The strike price is 100JPY/USD. The > current spot is 102.5, so the put option is OUT of > the money and thus no party bears any credit risk. the put was on JPY meaning there’s a payoff when it depreciates below the strike rate. Which it does
That’s correct. -1 for me. that’s a stupid miss.