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A swap is a method used to reduce financial risk. The following statements are correct, EXCEPT:
The earliest swaps were currency swaps, in which companies traded debt denominated in different currencies, e.g., dollars and yen.
A problem with swaps is that no standardized contracts exist, which has prevented the development of a secondary market.
Swaps are very often arranged by a financial intermediary, who may or may not take the position of one of the counterparties.
A company can swap fixed interest payments for floating interest payments.
None of the above
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Assume that a bank has assets located in London worth £150 million on which it earns an average of 8 percent per year. The bank has £100 million in liabilities on which it pays an average of 6 percent per year. The current spot exchange rate is £1..
Which of the following is a path dependent option?
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