Jemis Fund Management Inc. (Jemis) is a mutual fund company that frequently trades interest rate swaps. One of the swaps currently outstanding has a net present value (NPV) of $2 million in Jemis’ favor. According to Jemis, the $2 million represents its potential loss in the event of the counterparty’s default. Which of the following terms best describes this amount?
AExposure at default.
BRecovery.
CExpected loss.
DLoss given default.
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