A swap is a method used to reduce financial risk. Which of the following statements about swaps, if any, is NOTCORRECT?
- The earliest swaps were currency swaps, in which companies traded debt denominated in different currencies, say dollars and pounds.
- Swaps are very often arranged by a financial intermediary, who may or may not take the position of one of the counterparties.
- A problem with swaps is that no standardized contracts exist, which has prevented the development of a secondary market.
- A company can swap fixed interest payments for floating interest payments.
- A swap involves the exchange of cash payment obligations.
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