![]() A typical currency swap constitutes a foreign exchange agreement where two parties will exchange or ‘swap’ a series of payments in one currency for a series of payments in another currency. The article offers clear examples and explanations of each and highlights how they are similar and different to each other.Ī currency swap is an agreement between two parties to exchange specific amounts of different currencies. ![]() Currency swaps and FX swaps are similar to one another, and are, therefore, easily confused to be the same. The article takes a closer look at two types of swaps that are used for swapping foreign currency through minimizing foreign exchange rate risk. Swaps are derivatives that are used for swapping cash flow streams and are used in most instances for hedging purposes.
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