The Following Are All Advantages of Having an Equity Swap

question 19

Multiple Choice

The following are all advantages of having an equity swap market EXCEPT:

• A) These agreements allow investors to take advantage of overall price movements in a specific country's stock market.
• B) Creating a direct equity investment in a foreign country may be difficult for some investors where it is prohibited by law.
• C) These agreements eliminate the need for a counterparty because they are traded on the NYSE.
• D) An investment fund wanting to accumulate foreign index returns denominated in their domestic currency may not be legally permitted to obtain sufficient exchange-traded derivative contracts to hedge a direct equity investment.
• E) Equity swaps can reduce both the transaction costs and the tracking error.

---

Definitions:

Good Faith

An honest intention to act without taking an unfair advantage over another party.

High Process Control

A situation where there is strict regulation and management of the procedures and methods utilized in production or in carrying out tasks.

Third-party Conflict

A type of conflict resolution involving an outside party who intervenes to help the conflicting parties reach a resolution.

Arbitration

A form of alternative dispute resolution where a neutral third party makes a binding decision to resolve a dispute between two or more entities.