What type of swap arrangement is commonly used by Australian banks to manage their exchange rate risk on foreign bond issues?
A)Fixed-for-floating swap
B)Overnight indexed swaps
C)Cross-currency swaps
D)Credit default swaps
E)FX swaps

Question

Quizplus · Accepted Answer

Cross-currency swaps are commonly used by Australian banks to manage their exchange rate risk on foreign bond issues. This is because cross-currency swaps allow for the exchange of interest payments and principal in different currencies, thus reducing the foreign exchange risk.

What Type of Swap Arrangement Is Commonly Used by Australian