In: Finance
True or False: A swap provided a means for replacing a stream of uncertain and variable payments with a fixed, non-variable payment stream that is certain.
TRUE
A swap is a forward contract in which one stream of future payments is exchanged for another based on a specified principal amount. The either of the streams can be either fixed or variable.
True or False: The slope coefficient computed by regressing a particular stock’s historical returns on the S&P 500 index return is called β, the stock’s beta with respect to the S&p 500 index; beta is important in finding variance-minimizing hedged portfolios.
TRUE
A beta coefficient is a measure of the volatility or risk of an individual stock in comparison to the unsystematic risk of the entire market. In statistical terms, beta represents the slope of the line through a regression of data points from an individual stock's returns against those of the market.