可以解释一下这道题吗

问题如下：

A bank has both term loans and interest rate swaps outstanding with many of its medium-sized business clients. A risk manager at the bank is comparing the processes used to estimate different metrics that are inputs into the Basel credit risk capital calculation for the term loans and the swaps. According to the Basel Committee, which of the following metrics requires the addition of an add-on amount to the current estimate when calculating credit risk capital for interest rate swaps?

选项：

A.

Probability of default

B.

Effective duration

C.

Exposure at default

D.

Recovery rate

解释：

Explanation: C is correct. A problem in calculating credit risk capital for derivatives such as interest rate swaps is that it is difficult to calculate EAD for a derivatives transaction. In the case of a loan, EAD is usually the amount that has been advanced (or is expected to be advanced) to the borrower. In the case of a derivative, the exposure varies from day to day as the value of the derivative changes.
The Basel Committee’s standard rules for determining EAD have solved this problem by setting the EAD for derivatives equal to current exposure plus an add-on amount, which is an allowance for the possibility of the current exposure getting worse by the time a default occurs.
A, and D are incorrect. The estimation of these inputs is less inconsistent between loans and derivatives.

B is incorrect. This is a market risk measure.
Learning Objective: Explain why it is more difficult to calculate credit risk capital for derivatives than for loans.
Reference: Global Association of Risk Professionals, Valuation and Risk Models (New York, NY: Pearson, 2023). Chapter 6. Measuring Credit Risk [VRM–6]