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    Question

    Which of the following is a tool for managing interest

    rate risk?
    A Credit Default Swap (CDS) Correct Answer Incorrect Answer
    B Collateralized Debt Obligation (CDO) Correct Answer Incorrect Answer
    C Interest Rate Swap (IRS) Correct Answer Incorrect Answer
    D Letter of Credit (LC) Correct Answer Incorrect Answer
    E Factoring Correct Answer Incorrect Answer

    Solution

    An IRS is a derivative contract where two parties exchange interest rate payments (usually fixed for floating) to hedge against or manage exposure to fluctuations in interest rates.

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