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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