Which of the Below Statements Is FALSE

question 25

Multiple Choice

Which of the below statements is FALSE?

• A) The initial motivation for the interest rate swap market was borrower exploitation of what were perceived to be credit arbitrage opportunities.
• B) A borrower cannot benefit from issuing securities in the market in which it has a comparative advantage and then swapping obligations for the desired type of financing.
• C) Several observers have challenged the notion that credit arbitrage opportunities exist by arguing that the comparative advantage argument relies on assumptions of equilibrium in segmented markets.
• D) Those who challenge the credit arbitrage notion argue that the differences in quality spreads in the fixed-rate and floating-rate markets represent differences in the risks that lenders face in these two markets.