Explanation:
D None of the above.
The threshold is similar to a line of credit and subject to counterparty (default) risk. Further, collateralization does not eliminate operational and market risk.
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Q-146.3. An over-the-counter (OTC) bilateral derivatives contract that employs a collateralization agreement and a modest, non-zero threshold eliminates which risk(s)?
A
Counterparty risk
B
Market risk
C
Operational risk
D
None of the above