Explain the rapid development of interest rate swap market, Financial Management

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If the cost benefits of interest rate swaps would similarly be arbitraged away in competitive markets, what other descriptions exist to explain the rapid development of the interest rate swap market?

Answer:  All sorts of debt instruments are not all time available to all borrowers.  Interest rate swaps can help in market completeness. That is, a borrower may make use of a swap to get out of one sort of financing and to obtain a more desirable type of credit which is more appropriate for its asset maturity structure.


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