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Which of the following graphs is an accurate representation of a typical potential future exposure (PFE) profile for the corresponding instrument?
A
Fixed Rate Bond: Graph shows decreasing exposure over time (from 120% to ~40%) as time progresses.
B
Cross Currency Swap: Graph shows increasing exposure over time (from 0% to ~30%) as time progresses.
C
Interest Rate Swap: Graph shows relatively flat exposure around 6–8% across time.
D
Credit Default Swap: Graph shows a bell-shaped curve, peaking around year 2, then declining.