A ________ resembles a back-to-back loan except that it does not appear on a firm's balance sheet.
A) forward loan
B) currency hedge
C) counterparty
D) currency swap

Question

Quizplus · Accepted Answer

The given statement describes a currency swap, where two parties agree to exchange cash flows based on different currencies. In a currency swap, each party effectively borrows in one currency and lends in another, with the aim of reducing currency risk. However, unlike a back-to-back loan, a currency swap does not appear on a firm's balance sheet as it is considered an off-balance sheet transaction. Therefore, option D, currency swap, is the best choice.

A ________ Resembles a Back-To-Back Loan Except That It Does