Which one of the following methods of setting prices would reduce the transactions exposure for both the buyer and seller of a swap contract?
A)setting a permanent price at which a commodity will be traded
B)setting the price at the minimum spot price during a given period of time
C)setting the price equal to the spot price on the delivery date
D)using the average market price over a given period of time
E)setting the contract price equal to some percentage, less than 100 percent, of the market price on any given day

Question

Quizplus · Accepted Answer

Using the average market price over a given period of time helps to smooth out price fluctuations, reducing the risk of exposure to sudden price changes for both parties involved in the swap contract.

Which One of the Following Methods of Setting Prices Would