Podcast
Questions and Answers
What distinguishes swaps from most standardized options and futures contracts?
What distinguishes swaps from most standardized options and futures contracts?
- They are traded on the over-the-counter market between private parties. (correct)
- They involve minimal counterparty risk.
- They are highly liquid financial instruments.
- They can be easily traded over an exchange.
Why is there always some degree of counterparty risk involved in swaps?
Why is there always some degree of counterparty risk involved in swaps?
- They are highly regulated by government authorities.
- They are not popular among financial institutions.
- Swaps cannot be easily traded over an exchange. (correct)
- Swaps are matched with suitable counterparties without any risk.
Which of the following correctly describes the swap market?
Which of the following correctly describes the swap market?
- An illiquid market dominated by individual investors.
- Not preferred by knowledgeable traders.
- One of the largest and most liquid markets in the world. (correct)
- Restricted to trading on exchanges only.
What distinguishes swaps from forward claims?
What distinguishes swaps from forward claims?
Why are swaps considered fairly complex compared to stocks and bonds?
Why are swaps considered fairly complex compared to stocks and bonds?
Who are some key players in the swap market?
Who are some key players in the swap market?
What is a swap in the context of derivatives?
What is a swap in the context of derivatives?
Which type of swap allows the exchange of interest rate payments?
Which type of swap allows the exchange of interest rate payments?
Why do investors generally use swaps?
Why do investors generally use swaps?
What is the main purpose of futures contracts?
What is the main purpose of futures contracts?
In a fixed for floating interest rate swap, what is exchanged?
In a fixed for floating interest rate swap, what is exchanged?
How do currency swaps differ from interest rate swaps?
How do currency swaps differ from interest rate swaps?
What type of swap can a bank use to convert its fixed-rate assets into floating-rate assets?
What type of swap can a bank use to convert its fixed-rate assets into floating-rate assets?
In what scenario might a U.S. firm use a currency swap?
In what scenario might a U.S. firm use a currency swap?
What do Party A and Party B agree to in a plain vanilla interest rate swap?
What do Party A and Party B agree to in a plain vanilla interest rate swap?
Which type of swap is commonly used in the context of interest rates?
Which type of swap is commonly used in the context of interest rates?
What is the main purpose of using a fixed-pay swap by a bank?
What is the main purpose of using a fixed-pay swap by a bank?
How do swaps help companies get financing for which they have a comparative advantage?
How do swaps help companies get financing for which they have a comparative advantage?
