Assume a U.S. savings institution funds its fixed-rate mortgages by attracting short-term deposits. If it engages in an interest rate swap, but the index on the swap does not move in perfect tandem with its cost of deposits, this reflects
A) sovereign risk.
B) basis risk.
C) credit risk.
D) None of these are correct.
Correct Answer:
Verified
Q1: Swap transactions are only used to
A)hedge against
Q2: In a swap arrangement, the most common
Q4: Which of the following statements is incorrect?
A)Interest
Q5: A(n)_ swap allows the party making fixed
Q6: Financial institutions with _ interest rate-sensitive liabilities
Q7: The option on a callable swap would
Q8: A _ swap involves the exchange of
Q9: Sovereign risk differs from credit risk because
Q10: Savings institutions participate in the swap market
Q11: _ risk prevents an interest rate swap
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