Question

Some common types of bond swaps are?

1) I. tax swaps.
2) II. yield pickup swaps.
3) III. substitution swaps.
4) IV. credit default swaps.

Answer 1

Bond swaps are a type of financial transaction involving the exchange of one set of bonds for another. Some common types include tax swaps, yield pickup swaps, substitution swaps, and credit default swaps.

Step-by-step explanation:

Bond swaps are a type of financial transaction involving the exchange of one set of bonds for another. They are commonly used by investors to manage their portfolios and take advantage of changes in interest rates or credit risk.

Some common types of bond swaps include:

1. Tax swaps: These involve swapping bonds with differing tax treatments in order to optimize tax advantages.
2. Yield pickup swaps: These involve swapping low-yielding bonds for higher-yielding bonds to increase overall portfolio yield.
3. Substitution swaps: These involve swapping one bond for a similar bond with better terms or conditions.
4. Credit default swaps: These are not typically considered bond swaps, but are financial contracts that allow investors to protect against the risk of default by a specific bond or reference entity.