How Can Companies Use Swaps to Change the Risk of Securities

question 108

Essay

How can companies use swaps to change the risk of securities that they have issued?

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Definitions:

Social Security Retirement System

A government program that provides retirement, disability, and survivors benefits, funded by payroll taxes.

Opportunity Cost

The value of the next best alternative foregone as the result of making a decision.

Social Security Trust Fund

A governmental fund that collects payroll taxes to provide retirement, disability, and survivors' benefits.

Federal Government

The national government of a federation, responsible for national affairs, distinct from state or local governments.