Which one of the following statements related to swaps is correct?
A) Brokerage firms are the dominant swap dealers in the U.S.
B) Swaps can be custom tailored to a firm's needs.
C) As of 2017, all swaps are traded on a single organized exchange.
D) Swaps contracts are limited to interest rates.
E) Swap contracts are limited to a single payment at expiration.

Question

Quizplus · Accepted Answer

Swaps are contracts between two parties to exchange cash flows based on certain agreed-upon terms. Swaps can be custom tailored to a firm's needs, making option (B) correct. Option (A) is incorrect as banks are the dominant swap dealers in the US. Option (C) is incorrect as swaps are traded over-the-counter (OTC) and not on a single organized exchange. Option (D) is incorrect, as there are different types of swaps such as currency swaps and commodity swaps apart from interest rate swaps. Option (E) is incorrect as swaps involve multiple payments over a certain period.

Which One of the Following Statements Related to Swaps Is