A (An) ____ is an arrangement by which two parties exchange one currency for another and agree that the exchange will be reversed at a stipulated date in the future:
A) Arbitrage
B) Swap
C) Option
D) Hedge

Question

Quizplus · Accepted Answer

A swap is a financial contract between two parties where they agree to exchange cash flows based on an underlying financial instrument. In the case of a currency swap, the parties agree to exchange one currency for another and then reverse the transaction on a future date. This is different from a hedge, which is a financial instrument used to reduce risk, and an option, which is a contract that gives the holder the right, but not the obligation, to buy or sell an underlying asset at a specified price on or before a specified date. Arbitrage refers to the practice of buying and selling assets in different markets in order to take advantage of price differences.

A (An) ____ Is an Arrangement by Which Two Parties