Question

1. From the point of view of a borrowing corporation,

what are credit and repricing risks?

Answer 1

Credit and repricing risk

Credit risk is occured at the time of  restructuring the  creditworthiness  by the lender. This can be changing fees, changing interest rates, credit line changes etc. Here the risk factor is much higher. Because here we can see some changes or volatility in fees, interest rate and credit lines. So these can affect the borrowing adversely.

Repricing risk is the risk of changes in interest rates charged at the time a financial contract’s rate is reset. It will occur when there is any interest rate change. Some times the companies will decide to reset the rate of all contracts and that particular time there will make some changes in interest rate and these are some risk because this fluctuation will affect the borrowing companies.

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