Explanation:
A collateralization agreement with a modest, non-zero threshold does not eliminate counterparty risk; it only reduces it. Some exposure can still remain due to the threshold, delays in margining, haircuts, and market moves.
It also does not eliminate:
Therefore, the correct answer is None of the above.
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Question-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