Comment on the current credit risk assumed for each of the


Comment on the current credit risk assumed for each of the following positions. Treat them separately; that is, not combined with any other instruments.

a. You are short an out-of-the-money interest rate call option.

b. You entered into a pay fixed-receive floating interest rate swap a year ago. Since that time, interest rates have increased.

c. You are long an in-the-money currency put option.

d. You are long a forward contract. During the life of the contract the price of the underlying asset has decreased below the contract price.

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Finance Basics: Comment on the current credit risk assumed for each of the
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