A swap is a method used to reduce financial risk. Which of the following statements about swaps, if any, is NOT CORRECT?
A) A swap involves the exchange of cash payment obligations.
B) The earliest swaps were currency swaps, in which companies traded debt denominated in different currencies, say dollars and pounds.
C) Swaps are very often arranged by a financial intermediary, who may or may not take the position of one of the counterparties.
D) A problem with swaps is that no standardized contracts exist, which has prevented the development of a secondary market.
E) All of the statements above are actually true.

Question

Quizplus · Accepted Answer

This statement is not entirely true. While there are no standardized contracts for swaps, a secondary market for swaps does exist. However, the lack of standardization can make it more difficult for buyers and sellers to agree on the terms of the swap.

A Swap Is a Method Used to Reduce Financial Risk