Munkres Topology Solutions Manual

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Problems And Solutions Manual
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Answer: Default arises if, at maturity, one of the parties fails to fulfill their obligations under the contract. Default risk only matters for the party that is ”in the money” at maturity, that is, that stands to profit at the locked-in price in the contract. (If the spot price at maturity is such that a party would lose from performing on the obligation in the contract, counterparty default is not a problem.) Prior to maturity, since either party may finish in-the-money, both parties are exposed to default .

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Exercise And Solutions Manual
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