Which of the following statements regarding interest rate swaps is incorrect?
A) In contrast with a forward contract, the exact terms of exchange of an interest rate swap will change with interest rates.
B) The two parties exchange net interest difference in an interest rate swap.
C) An interest rate swap is similar to a forward contract in that it guarantees the exchange of two items of value at some future point in time.
D) The two parties in an interest rate swap generally have the same level of default risk.

Question

Quizplus · Accepted Answer

Interest rate swaps often involve parties with differing levels of default risk, as they are used to manage or hedge against interest rate exposure rather than to equalize credit risk between parties.

Which of the Following Statements Regarding Interest Rate Swaps Is