Question

A swap is: a) another name for a put option. b) another name for a call option. c) an agreement between two or more persons to exchange sets of cash flows over some future period. d) the name for the replacement of a futures contract by an options contract.

Answer 1

Answer:

The correct answer is option c.

Explanation:

A swap can be defined as a derivative contract that enables the exchange of cash flows or liabilities of two financial instruments. The most common instruments that are swapped are loans or bonds. An interest rate swap is the most common type of swap.  

The other kind of swaps are  

• Commodity swaps
• Currency swaps
• Debt-equity swaps