What Is Replacement Risk in the Swap Market

Multiple Choice

What is replacement risk in the swap market?

A) The risk of substituting a defaulted swap with a new swap at less favorable terms.
B) The cost incurred by the swap dealer in replacing the defaulting party on the same terms as the original swap.
C) The risk involved in exchanging fixed interest payments for floating interest payments by two counterparties.
D) The risk associated with long-term hedge sometimes for as long as 15 years.
E) The comparative disadvantage faced by swap seller in making variable or floating rate payments.