Which of the following statements is incorrect?
A) Interest rate swaps are sometimes used by financial institutions and other firms for speculative purposes.
B) A primary reason for the popularity of interest rate swaps is the existence of market imperfections.
C) Swaps are necessary for some financial institutions to obtain the maturities or rate sensitivities on funds that they desire.
D) Most financial institutions that anticipate that interest rates will move in an unfavorable direction do not hedge their positions.
Correct Answer:
Verified
Q1: Swap transactions are only used to
A)hedge against
Q2: In a swap arrangement, the most common
Q3: Assume a U.S. savings institution funds its
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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