A swap is a method used to reduce financial risk.Which statement about swaps is NOT correct?
A)A swap involves the exchange of cash payment obligations.
B)The earliest swaps were currency swaps, in which companies traded debt denominated in different currencies, say, dollars and pounds.
C)Swaps are very often arranged by a financial intermediary, which may or may not take the position of one of the counterparties.
D)A problem with swaps is the short maturities, which has prevented the development of a secondary market.

Question

Quizplus · Accepted Answer

The statement that "A problem with swaps is the short maturities, which has prevented the development of a secondary market" is not correct. Swaps actually have flexible maturities and can range from a few months to several years, making them attractive to investors with different investment goals and strategies. Additionally, there is a well-developed secondary market for swaps, with many financial institutions acting as market makers and facilitating trading between buyers and sellers.

A Swap Is a Method Used to Reduce Financial Risk