3 ms·
It's not a notional principal for a fx swap, it's an actual principal that you swap. If your counterpart defaults, you're still liable for what you owe (usually
by lucozade 4y ago
It's not a notional principal for a fx swap, it's an actual principal that you swap. If your counterpart defaults, you're still liable for what you owe (usually multiple millions) but you won't receive the other side.
- snake_doc 4y agoBut in a sense, only the cost of capital is at risk, not the capital borrowed. The 80T number is capital borrowed. It’s definitely worthy of skepticism. It’s definitely a liquidity risk given the short term and principal swaps requirements, hence mostly a central bank issue as a backstop. But potential losses in economic terms seem smaller.