Intermediaries are active in the swap markets because
A) they increase liquidity.
B) they reduce default risk.
C) they reduce search cost.
D) all of the above are true.

Question

Quizplus · Accepted Answer

Intermediaries play a crucial role in the swap markets by increasing liquidity, reducing default risk and reducing search cost. They bring buyers and sellers together, making it easier for them to find counterparties with the desired characteristics. Intermediaries also provide services such as credit analysis and risk management, which reduce default risk for both parties. Additionally, by helping to match buyers and sellers efficiently, intermediaries reduce search costs, making it easier for market participants to find the right counterparties at the right time.

Intermediaries Are Active in the Swap Markets Because