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What are Currency Swaps
>> YOUR LINK HERE: ___ http://youtube.com/watch?v=FyZ78Q2DeSE
In todays video we learn about currency swaps. • These classes are all based on the book Trading and Pricing Financial Derivatives, available on Amazon at this link. https://amzn.to/2WIoAL0 • Check out our website http://www.onfinance.org/ • Follow Patrick on twitter here: / patrickeboyle • What are currency swaps? • A currency swap is a financial derivatives agreement in which two parties exchange the principal amount of a loan and the interest in one currency for the principal and interest in another currency. • At the inception of the swap, the equivalent principal amounts are exchanged at the spot rate. • During the length of the swap each party pays the interest on the swapped principal loan amount. • At the end of the swap the principal amounts are swapped back at either the prevailing spot rate, or at a pre-agreed rate such as the rate of the original exchange of principals. Using the original rate would remove transaction risk on the swap. • Currency swaps are used to obtain foreign currency loans at a better interest rate than a company could obtain by borrowing directly in a foreign market or as a method of hedging transaction risk on foreign currency loans which it has already taken out.
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