When a financial intermediary is involved as an interest rate swap counterparty,it often seeks to arrange an offsetting swap called a:
A) counterparty swap.
B) simultaneous swap.
C) synchronised swap.
D) matched swap.

Question

Quizplus · Accepted Answer

A financial intermediary involved in an interest rate swap may seek to minimize its own risks by entering into an offsetting swap with another party, referred to as a matched swap. This allows the intermediary to balance their own interest rate exposure and reduce their overall risk. Therefore, option D) is the correct answer. Option A), counterparty swap, is not a commonly used term in the interest rate swap market. Option B) and C), simultaneous and synchronised swap, do not accurately describe the concept of an offsetting swap entered into by a financial intermediary.

When a Financial Intermediary Is Involved as an Interest Rate