Swap Rates and Credit Quality
Posted: 14 Sep 1999
Date Written: August 1994
The impact of credit quality on swap rates is determined under alternative netting assumptions. With counterparties of different default risk, swap valuation is non-linear in the underlying promised exchange of cash flows. The impact of credit risk asymmetry and of netting is presented through both theory and numerical examples, which include interest rate and currency swaps.
JEL Classification: G00
Suggested Citation: Suggested Citation