A Advantage of Using Swaps to Hedge Interest-Rate Risk Is

question 7

Multiple Choice

A advantage of using swaps to hedge interest-rate risk is that swaps

• A)are less costly than futures.
• B)can be written for long horizons.
• C)are not subject to default risk.
• D)are more liquid than futures.

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Definitions:

Demand Equation

A mathematical expression that illustrates the relationship between the quantity demanded of a good and its price, along with other factors influencing demand.

Equilibrium Price

The price at which the quantity of a good or service demanded by consumers is equal to the quantity supplied by producers, creating a balance in the market.

Ticket Scalping

The practice of buying tickets for an event and reselling them at a higher price to earn a profit, often considered illegal or unethical.

Equilibrium Levels

The state in which market supply and demand balance each other, and as a result, prices become stable.