When Are the Standby Letters of Credit Used in Swap

Multiple Choice

When are the standby letters of credit used in swap agreements?

A) When the counterparty is perceived to be of significantly lower credit quality than the other party.
B) Where the swap agreement is made between parties of equal credit standing.
C) Where the swap agreement is made between high-quality counterparties.
D) When one party posts collateral in lieu of default.
E) When the no-arbitrage condition does not hold good.