Swaps create value if
A)relative prices differ across markets.
B)there are barriers to entry in some markets.
C)information is costly.
D)All of the options.

Question

Quizplus · Accepted Answer

Swaps can create value if any or all of the options mentioned in the choices (A, B, and C) are applicable. If relative prices differ across markets, then there is an opportunity to gain from exchanging assets or securities. If there are barriers to entry in some markets, then swaps can allow parties to gain access to those markets without facing those entry barriers. If information is costly, then swaps can allow parties to benefit from each other's information and improve overall market efficiency. Therefore, all of the options (A, B, and C) are possible reasons why swaps can create value, and the most appropriate answer is D.

Swaps Create Value If