Salomon MOODYS Page 3
In some cases, firms have responded by limiting their transactions to counterparties
they consider to be of the highest credit quality, that is, Aa- or Aaa-rated entities. To
address the issue, Salomon created Swapco, a Aaa-rated, bankruptcy-remote, spe-
cial-purpose company to transact in derivatives. Swapco is the second subsidiary to be
formed for the purpose of dealing in a relatively wide range of derivatives products.
Counterparties that transact with Swapco will be exposed to the Aaa-risk of Swapco,
rather than the A3 risk of Salomon Inc.
Interest Rate and Currency Swap Volumes
(notional values of contracts)
Interest Rate Swaps
Source: International Swap Dealers Association. Note: only data from respondents to ISDA surveys included.