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Bank A has just entered into a plain vanilla interest rate swap with Bank B as the pay-fixed counterparty. Bank B is the receive-fixed counterparty. The forward spot curve is upward sloping. Assuming that LIBOR starts trending down, the credit risk from the swap will: A. increase for Bank A only. B. decrease for both banks. C. increase for Bank B only. D. increase for Bank A and decrease for Bank B. |