Which of the following are the least likely methods of terminating a swap? Purchasing a swaption Selling the swap to a counterparty Returning the swap to the exchange

The least likely method is returning the swap to the exchange. Most swaps are over-the-counter agreements, so there is no exchange. Even if there were, the exchange isn't in the business to assume one side of the swap, but rather to pair buyers and sellers. The following methods of terminating a swap are feasible: Purchasing a swaptionSelling the swap to a counterpartyEnter into a separate offsetting swapThe contract specifies early termination by either party with cash settlement

swaps are otc agreements, so returning it to an exchange doesn't make much sense...

Question Of The Week - Derivatives (7) - CFA Level 1

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This topic has 5 replies, 4 voices, and was last updated Jan-188:01 pm by AdaptPrep.

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- AdaptPrep
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  17 Jan 2018 at 7:41 am
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  Which of the following are the least likely methods of terminating a swap?
  - Purchasing a swaption
  - Selling the swap to a counterparty
  - Returning the swap to the exchange
- simply_complex2
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  - CFA Level 1
  17 Jan 2018 at 9:22 pm
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  i was thinking to myself…why is this question so familiar, and then i realized it was on the Passedtense mock i took yesterday :smiley:
- ufsguy
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  18 Jan 2018 at 8:08 pm
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  swaps are otc agreements, so returning it to an exchange doesn’t make much sense…
- ufsguy
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  18 Jan 2018 at 8:17 pm
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  oh… it says what’s the least likely method…. yes, c is the best answer.
- wm247
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  20 Jan 2018 at 4:09 am
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  LEAST, MOST…. those words really start to get on my nerves. Under pressure, it’s so easy to overlook them, and thus bye-bye 1/240 point. :s
- AdaptPrep
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  20 Jan 2018 at 8:01 pm
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  The least likely method is returning the swap to the exchange. Most swaps are over-the-counter
  agreements, so there is no exchange. Even if there were, the exchange isn’t in
  the business to assume one side of the swap, but rather to pair buyers and
  sellers.
  
  The following methods of terminating a swap are feasible:
  - Purchasing a swaption
  - Selling the swap to a counterparty
  - Enter into a separate offsetting swap
  - The contract specifies early termination by either party
    with cash settlement
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