BuyFindarrow_forward

Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250

Solutions

Chapter
Section
BuyFindarrow_forward

Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250
Textbook Problem

How can swaps be used to reduce the risks associated with debt contracts?

Summary Introduction

To discuss: The ways in which swaps can be used to reduce risk related with the debt contracts.

Introduction:

A type of financial security whose value is derived from the value of a particular underlying asset is termed as Derivative. This form of financial security consists of two or more parties who enter into an agreement to purchase or sell an asset at a specific price on a particular period. They are four types of derivative securities that are as follows:

  • Forward contract
  • Future contract
  • Swap
  • Option
Explanation

The ways in which swaps can be used to reduce risk related with the debt contracts are as follows:

The firm can use swaps to reduce its financial risk through exchanging its debts for another party’s debts. It is because this party mostly prefers other’s debt contract terms to mitigate risks.  There are two ways to reduce risk by using swap options which are as follows:

  • Currency swap: In this form...

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

Use a production possibilities frontier to describe the idea of efficiency.

Brief Principles of Macroeconomics (MindTap Course List)

Describe how banks create money.

Principles of Macroeconomics (MindTap Course List)

Explain the purpose of a chart of accounts.

College Accounting, Chapters 1-27

Explain the advantage of establishing a tax calendar.

College Accounting (Book Only): A Career Approach

EXPECTED RETURN A stock's returns have the following distribution: Demand for the Companys Products Probability...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

What are the two major types of materials, and how do they differ?

College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)