A swap is a financial contract between two parties where they agree to exchange cash flows at one or more future dates. Swaps are often used to restructure balance sheets, and they allow firms to convert debt from fixed to floating rates, or vice versa. Therefore, all three options A, B, and C are correct.

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A Swap

Question 27

Multiple Choice

A swap

A) obligates two counterparties to exchange cash flows at one or more future dates.
B) allows participants to restructure their balance sheets.
C) allows a firm to convert outstanding fixed rate debt to floating rate debt.
D) A and B.
E) A,B,and C.

Correct Answer: