Equity Swap Valuation

Which of Fernandez's conclusions can be considered _most accurate_?

Incorrect. The highest credit risk for an interest rate swap is during the middle of the swap, but this risk *decreases* as it nears the end of the swap. Since the number of remaining swap payments decreases, so does the credit risk.

Quite right. Conclusion 2 is accurate. Since there's an exchange of principal, the highest potential credit risk is both during the middle of the swap and at the end of the swap.

Incorrect. One of the conclusions isn't accurate.

Only Conclusion 1

Only Conclusion 2

Both Conclusion 1 and Conclusion 2