Swaps are __________ agreements involving the exchange of interest payments __________.
A) standardized; against a bundle of Treasury securities
B) standardized; on a stated notional principal amount
C) customized; against a bundle of Treasury securities
D) customized; on a stated notional principal amount

Question

Quizplus · Accepted Answer

Swaps can be either standardized or customized depending on the needs of the parties involved. However, the question specifies that the swaps involve the exchange of interest payments, which indicates that they are interest rate swaps. Interest rate swaps involve the exchange of interest payments based on a notional principal amount, so the correct answer is D, which indicates that the swaps are customized and based on a stated notional principal amount.

Swaps Are __________ Agreements Involving the Exchange of Interest Payments