Credit Risk In Equity Swap Is Highest _________?

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Credit Risk In Equity Swap Is Highest _________?
A) at the end of the swap’s life?
B) during the middle of the swap’s life?
why?
 
b
at the end of the swaps life there is only one payment left so credit risk is minimal. In the middle of the swaps life, credit risk is still quite high because you may not receive your remaining swap payments from the counterparty.
 
would look at it like an interest rate swap, and say the middle - no notional is swapped, unlike a currency swap where credit risk is higher near the end…
 
All swaps except currency swaps have the greatest credit risk in the middle of there life. It is assumed at the start of the contract both parties are healthy and capable of paying there responsibilities. So since inception the credit qualities of the company can decline.
Currency have the same principle but it is a little closer to the end since you exchange currency at the termination and start of the swap
 
Interest rate swap and equity swap = middle
Currency swap = middle to end.
 
Even if there is a notional amount exchanged, woulden’t there be more credit risk at the begining?
 
No, Why would you enter into a contract with a company you knew would defualt?
 
johnnyblazini Wrote:
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> Even if there is a notional amount exchanged,
> woulden’t there be more credit risk at the
> begining?
Would you enter into a currency swap with Lehman or AIG in August 2009?
 
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