Thanks to the recent development of analytical pricing models for swaps with bilateral credit risk, a,comprehensive analysis of the dimensions of default risk has become possible. Using the model developed by,hübner (2001) for irs and cs, this article investigates the impact of,structural and temporary credit risk changes on swap prices. It emphasizes that large variations in swap values,and sensitivities may exist depending on the sources of credit risk differences between the counterparties. This,phenomenon is stronger for cs because of the exchange of principal and an additional correlation risk that,exhibits a nonnegligible impact on the contract value. The influence of a netting master agreement also can be,analyzed for a wide range of initial contract values and netted notionals. The results confirm the hedging,properties put forward by duffie and huang (1996) as a special case, but,clearly show that they cannot be generalized to any netting pattern. Prevailing market conditions are shown to,play a central role in the effectiveness of netting as a hedging device.