Examples of Swap in the following topics:
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- A currency swap is a periodic exchange of foreign currencies between two parties, viewed as a swap of two forward currency contracts.
- Swap contracts specify the following:
- This book only discusses a currency swap, where both legs of the swap are denominated in different currencies.
- If Company XYZ liquidates the swap, the company must receive $61.9 million to sell the swap.
- Thus, the currency swap has a credit risk.
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- Company XYZ enters into a 5-year swap agreement with a dealer, and four years have passed.
- Swap's face values are $100 million and 110 million euros with a coupon interest of 3% for U.S. dollars and 4% for the euros.
- Calculate the swap's present value.
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- Define a currency swap with a ‘spot against a forward. '
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- Credit default swaps are an instrument to protect against default risk.
- This image shows the monthly prices of sovereign credit default swaps from January 2010 till September 2011 of Greece, Portugal, Ireland, Hungary, Italy, Spain, Belgium, France, Germany, and the UK (Greece is illustrated by blue line).
- Higher credit default swap prices mean that investors perceive a higher risk of default.
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- This chapter explains the derivative forms: futures and options contracts, credit default swaps, and currency swaps.
- Finally, commercial and investment banks created a variety of new securities, called Credit Default Swaps (CDS) that played a role in the 2008 Financial Crisis.
- Common derivatives are futures, forwards, options, Credit Default Swaps, and currency swaps.
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- The most common types of derivatives are forwards, futures, options, and swaps.
- Products such as swaps, forward rate agreements, exotic options - and other exotic derivatives - are almost always traded in this way.
- Swaps are derivatives in which counterparties exchange cash flows of one party's financial instrument for those of the other party's financial instrument.
- For example, in the case of a swap involving two bonds, the benefits in question can be the periodic interest (or coupon) payments associated with the bonds.
- The swap agreement defines the dates when the cash flows are to be paid and the way they are calculated.
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- A spot against a forward is a particular currency swap.
- A currency swap allows a corporation to invest in a foreign country by borrowing from its local bank.
- Then the company swaps its debt obligation with a foreign company to get the currency it needs for investing in another country.
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- Credit Default Swaps are a form of insurance.
- $\text{Swap Value}=107.9\text{ million } \euro \cdot \frac{\ 2.20}{1 \euro}-\ 98.1\text{ million}=\ 31.4\text{ million}$
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- International banks and investors use currency swaps to reduce exchange rate risk and lower transaction costs.
- A currency swap is the exchange of debt instruments denominated in different currencies.
- For instance, a forward-forward swap means a firm and a bank exchange two forward contracts with each other.
- Now Intel and Volkswagen can exchange their loans, using currency swaps.
- A popular currency swap is a spot against a forward, and it comprised 57% of trades in 2004.
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- FRBs can also be obtained synthetically by the combination of a fixed rate bond and an interest rate swap.
- This combination is known as an "asset swap. "