Agreement between two parties to exchange cash flows in future and cash flows are based on underlying instruments is classified as

A. swaps

B. interchange

C. exchange

D. index

Answer: Option A

Solution(By Examveda Team)

Agreement between two parties to exchange cash flows in future and cash flows are based on underlying instruments is classified as swaps. A swap is a derivative contract through which two parties exchange the cash flows or liabilities from two different financial instruments.