What Is the Name of a Swap in Which the Counterparties

question 430

Multiple Choice

What is the name of a swap in which the counterparties sell currencies to each other with a concomitant agreement to reverse the exchange of currencies at a fixed date in the future at the same price, and where the interest rates for the two currencies are reflected in the two exchanges but paid separately?

• A) aFXswap
• B) an in/out swap
• C) a currency swap
• D) a quanto swap

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Definitions:

Monopolistic Competition

A market structure in which there are many competing producers in an industry, each producer sells a differentiated product, and there is free entry and exit into and from the industry in the long run.

Barriers To Entry

Factors that prevent or hinder new competitors from easily entering an industry or area of business.

Product Differentiation

The attempt by firms to convince buyers that their products are different from those of other firms in the industry. If firms can so convince buyers, they can charge a higher price.

Perfectly Elastic

A situation in economics where the quantity demanded or supplied changes by an infinite amount in response to any change in price; depicted by a horizontal line in price-quantity graphs.