Which of the following statements correctly describes the fundamental principle of swaps?

Question

Quizplus · Accepted Answer

Swaps are based on the principle of comparative advantage, meaning that each party has an advantage in a different market or activity. For example, one party may have a lower cost of borrowing in a particular currency, while the other party may have better access to a specific commodity or market. By swapping cash flows or assets, each party can benefit from the other's comparative advantage. B, C, and D do not accurately describe the fundamental principle of swaps.

Which of the Following Statements Correctly Describes the Fundamental Principle