A contract requiring a specified future monetary payment at a specified future point in time in exchange for the delivery of a specific asset is called a: * A. nonconvertible option. B. hedge. C. long contract. D. swap.

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Swaps

A swap is a derivative contract in which two parties are agreed to exchange their cash flows from two different financial instruments for a defined period. In swap contracts, cash flows from one financial instrument are fixed and cash flow from other financial instruments is variable based on the interest rate, exchange rate, and commodity price. Swap contracts are transacted in an over-the-counter system. Swap contracts are utilized to hedge risk and mitigate loss.