Which of the following is an advantage of having swap dealers?
A)They serve the function of taking the opposite side of each transaction in order to keep the swap market liquid.
B)They reduce the search costs of finding counterparties having mirror image financing requirement.
C)They generally guarantee swap payments over the life of the contract.
D)They incur any costs associated with the default by replacing the defaulting party on the same terms as the original swap.
E)All of the above.

Question

Quizplus · Accepted Answer

All of the options listed are advantages of having swap dealers. Swap dealers serve as market makers, which means they take the opposite side of each transaction in order to keep the swap market liquid. This helps reduce search costs and makes it easy for counterparties to find each other. Additionally, many swap dealers guarantee swap payments over the life of the contract and will incur any costs associated with the default by replacing the defaulting party on the same terms as the original swap.

Which of the Following Is an Advantage of Having Swap