Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Credit risk has traditionally been a feature of OTC derivatives markets. Consider two companies, A
and B, that have entered into a number of derivatives transactions. If A defaults when
the net value of the outstanding transactions to B is positive, a loss is likely to be taken
by B. Similarly, if B defaults when the net value of outstanding transactions to A is positive, a loss is likely to be taken by company A
How should this be understood, i dont understand how a positive value will give rise to a loss for the other company
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