Question

What do swaps and forwards have in common?

	A.	They are both only used to hedge short-term (< 12 mths) exposures.
	B.	They are both OTC (Over The Counter) products.
	C.	They are both used solely to hedge interest rate risk.
	D.	They both offer standardised terms and conditions.
	E.	They are both exchange traded products.

Answer 1

Option B is correct. They are both OTC (Over The Counter) products. Both swaps and forwards are done at the dealer desk without intervention or supervision of exchange

Option A is incorrect because forwards and swaps can be used for long periods

Option C is incorrect because swaps and forwards can be used for exchange rate ris as well

Option D is incorrect because they both are customized to the needs of the parties

Option E is incorrect because they both are traded at over the counter but not on exchange