Which of the following is NOT an advantage of having an interest rate swap market?
A) As it is generally liquid, it benefits both borrowers and lenders.
B) As most swaps involve banks, their credit departments can carry out credit assessments more easily than potential lenders.
C) As the banks are involved in most swaps, banks require a spread between the two interest rates.
D) Swaps enable companies to carry out regulatory and tax arbitrage.

Question

Quizplus · Accepted Answer

This statement is not an advantage of having an interest rate swap market, as it highlights a potential disadvantage for borrowers who may have to pay a higher rate due to the spread required by banks involved in swaps. The other statements mention benefits such as liquidity, easier credit assessments, and the ability to carry out regulatory and tax arbitrage.

Which of the Following Is NOT an Advantage of Having