Regarding a total return credit swap which of the following statements is least accurate? A) The total return payer receives an amount based on a specified reference at the swap’s settlement dates. B) The swap can hedge many types of risk with a single contract. C) The total return payer owns the underlying assets.
C? The total return receiver should be holding the underlier?
Correct answer is C. A) is acurate because “The total return payer receives an amount based on a specified reference at the swap’s settlement dates” is exactly how the total return swap works. B) is acurate because the swap can hedge currency, credit, and a host of other risks with a single contract. C) is not acurate because the total return payer does not have to own the underlying assets. If an investor enters into a total return swap as the payer without owning the underlying asset, he is effectively shorting the asset.
I think C because you don’t need to hold the underlying asset.
C because first two seem correct to me:)
i’m retarded. i didn’t see the LEAST and read A and stopped there. reading is hard sometimes.