What Is the Basic Reason That Two Counterparties Enter into a Swap

question 14

Multiple Choice

What is the basic reason that two counterparties enter into a swap agreement?

• A)Exchange of one specified cash flow in the future based on some underlying index.
• B)Better management of credit risk by using a fixed or floating rate bond as hedging instrument.
• C)To restructure or off-set the expected future cash flows to be collected from assets or liabilities held on the balance sheet.
• D)Exchange of assets for a specific period of time at a specified interval.
• E)Taking the opposite side of each transaction in order to keep the swap market liquid.

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Definitions:

Country Club Management

A leadership style that emphasizes the well-being and needs of employees over the productive output of the team or organization.

Middle-Of-The-Road Management

A leadership style that strives to balance task completion with the well-being and needs of team members.

Behavioral

Pertaining to actions or responses of individuals or groups, often studied in psychology and social sciences to understand and influence human conduct.

Trait

A characteristic or quality of an individual, often inherent, that influences their behavior and actions.