Answer: P, Q, S, R

The correct order of net exposure per counterparty, from highest to lowest, is determined by calculating the net mark-to-market (MtM) for each counterparty after applying the netting agreements. Here's the breakdown: For Counterparty P: - With Q: Net MtM = 8 - 6 = $2 - With R: Net MtM = 10 - 2 = $8 - With S: Net MtM = 4 - 4 = $0 - Total net exposure for P = $2 + $8 + $0 = $10 For Counterparty Q: - With P: Net MtM = 15 - 16 = -1 (which becomes $0 as negative netted amount means no exposure) - With R: Net MtM = 6 - 0 = $6 - With S: Net MtM = 7 - 8 = -1 (which becomes $0) - Total net exposure for Q = $0 + $6 + $0 = $6 For Counterparty R: - With P: Net MtM = 6 - 6 = $0 - With Q: Net MtM = 4 - 5 = -1 (which becomes $0) - With S: Net MtM = 8 - 12 = -4 (which becomes $0) - Total net exposure for R = $0 + $0 + $0 = $0 For Counterparty S: - With P: Net MtM = 2 - 2 = $0 - With Q: Net MtM = 13 - 10 = $3 - With R: Net MtM = 1 - 1 = $0 - Total net exposure for S = $0 + $3 + $0 = $3 Thus, the correct sequence of net exposure amounts per counterparty, from highest to lowest, is P ($10), Q ($6), S ($3), and R ($0), which corresponds to option A: P, Q, S, R.

Author: LeetQuiz Editorial Team