One reason swaps are desirable is that
A) they are free of credit risk.
B) they have no transactions costs.
C) they increase interest rate volatility.
D) they increase interest rate risk.
E) they offer participants easy ways to restructure their balance sheets.

Question

Quizplus · Accepted Answer

Swaps are desirable because they offer participants an efficient method to restructure their balance sheets, allowing them to adjust their exposure to various financial risks (such as interest rate or currency risks) in a tailored manner. Swaps do not eliminate credit risk, typically involve transaction costs, and do not inherently increase interest rate volatility or risk; instead, they are tools for managing such exposures.

One Reason Swaps Are Desirable Is That