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Suppose, bank has arranged swap for A credit rating company with BBB credit rating company. If BBB credit rating company default on their loan then
1) what is the risk that bank will face??
2) what is the risk that A credit rating company will face??Sir i want to understand this more than memorising this thats why i am asking this question…
Anyone entering into a swap is taking the risk that the other party might default (which is why it is likely dome through a bank to guarantee against it).
The only relevance of the credit ratings is that the worse the credit rating then the more dangerous there is of default.
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