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Basic Question 4 of 18
Which of the following statements about swap agreements is FALSE?
B. Counterparties are the principles who engage in a swap agreement.
C. They allow for the exchange of different sets of future cash flows.
D. Interest rate and currency swaps are common types of swaps.
A. They are standardized agreements, similar to futures.
B. Counterparties are the principles who engage in a swap agreement.
C. They allow for the exchange of different sets of future cash flows.
D. Interest rate and currency swaps are common types of swaps.
User Contributed Comments 4
| User | Comment |
|---|---|
| cy166099 | What specific types of companies would be interested to do a swap agreement? |
| Kevdharr | cy166099, really a number of different companies can utilize swaps. Essentially any company that needs funding and wants to borrow money using a specific type of rate. In many cases, swaps are used by companies that desire a type of interest rate structure (i.e., fixed or floating) that another firm can obtain at a lower cost. So let's say company A wants to borrow at a fixed rate and company B wants to borrow at a floating rate. Furthermore, let's assume that company B can borrow at a better FIXED rate than company A and company A can borrow at a better FLOATING rate than company B. The two would enter into an interest rate swap agreement that would effectively enable them to borrow at the kind of rates that they desire and at a better rate than they would have otherwise been able to obtain. |
| farhan92 | a lot of hedge funds use swaps..but then again hedge funds like a bit of everything |
| Achut | Shouldn't B and C also be there |
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Learning Outcome Statements
describe classifications of assets and markets
describe the major types of securities, currencies, contracts, commodities, and real assets that trade in organized markets, including their distinguishing characteristics and major subtypes
CFA® 2025 Level I Curriculum, Volume 3, Module 1.