A Swap Is a Method Used to Reduce Financial Risk

question 6

Multiple Choice

A swap is a method used to reduce financial risk. Which of the following statements about swaps, if any, is NOT CORRECT?

• A) A swap involves the exchange of cash payment obligations.
• B) The earliest swaps were currency swaps, in which companies traded debt denominated in different currencies, say dollars and pounds.
• C) Swaps are very often arranged by a financial intermediary, who may or may not take the position of one of the counterparties.
• D) A problem with swaps is that no standardized contracts exist, which has prevented the development of a secondary market.
• E) All of the statements above are actually true.

---

Definitions:

Intermittently Reinforced

A conditioning schedule where only some of the responses made are followed by reinforcement, known to produce behavior that is more resistant to extinction than continuous reinforcement.

Parents

The caregivers of offspring in their own species; in humans, typically refers to a child's biological or adoptive mother and father.

Extinction

in psychology, refers to the gradual disappearance of a conditioned response when the conditioned stimulus is no longer paired with the unconditioned stimulus.

Resistance To Extinction

The persistence of learned behavior or response even after the original stimulus (e.g., reinforcement) is no longer present.