Duffie paper sparks debate over credit risk in FX swaps and forwards
A disagreement has broken out between academics and foreign exchange market participants over the true extent to which FX swaps and forwards pose sufficiently low counterparty credit risk to merit a complete exemption from mandatory central clearing under the US Dodd-Frank Act.
On April 29, the US Department of the Treasury issued a proposed determination to exempt FX swaps and forwards, which is open for comment for 30 days. On May 12, Darrell Duffie, professor of finance at Stanford University
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