Interest-Rate Swaps Are

question 56

Multiple Choice

Interest-rate swaps are:

• A)Exchanges of equity securities for debt securities.
• B)Agreements between two parties to exchange periodic interest-rate payments over some future period.
• C)Agreements involving swapping of option contracts.
• D)Agreements that allow both parties to convert floating interest rates to fixed interest rates.

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Definitions:

Long-Short Hedge Fund

An investment fund strategy that aims to generate returns by taking long positions in undervalued securities and short positions in overvalued securities.

Short Selling

The practice of selling securities or other financial instruments that are not currently owned, and subsequently repurchasing them at a lower price.

Market Neutral

An investment strategy that seeks to avoid some forms of market risk by taking offsetting positions in different securities, aiming for a net market exposure of zero.

Government Regulation

The act of controlling business behavior through a set of rules or laws set forth by the government to achieve outcomes that might not be achieved through free markets.