Total Return Swaps (TRSs) Are Sometimes Undertaken Between Banks Who

question 26

Multiple Choice

Total return swaps (TRSs) are sometimes undertaken between banks who can access an asset on-balance-sheet and funds that lack access to, or are not allowed to, hold the asset. In such a situation,

• A) The bank is using the TRS to enhance its credit exposure to the underlying asset.
• B) The fund is making the bank assume risk that it does not itself wish to assume.
• C) The bank is enhancing its return at the expense of the fund.
• D) The bank is effectively lending the use of its balance sheet to the fund.

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