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Question
What is the basic reason that two counterparties enter into a swap agreement?
A. Exchange of one specified cash flow in the future based on some underlying index.
B. Better management of credit risk by using a fixed or floating rate bond as hedging instrument.
C. To restructure or off-set the expected future cash flows to be collected from assets or liabilities held on the balance sheet.
D. Exchange of assets for a specific period of time at a specified interval.
E. Taking the opposite side of each transaction in order to keep the swap market liquid.
Answer
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