The following points highlight the four main categories of swaps between corporate borrowers. The categories are: 1. Principal-Only-Swaps 2. Interest Rate Swaps 3. Currency Swaps 4. Carry Trade Swap. Category # 1. Principal-Only-Swaps: These are typically used for hedging loan transactions. If a corporate borrowers in Yen and wants to swap the loan into US$ or Rupee, it could opt [...]
In this article we will discuss about:- 1. Meaning of Forward Exchange Contract 2. Closing Out of Forward Exchange Contracts 3. Extension of Forward Exchange Contracts 4. Cost or Gain of Forward Cover 5. Benefits and Drawbacks of Forward Exchange Contract. Meaning of Forward Exchange Contract: A forward contract is simply an agreement to buy or sell foreign exchange at [...]
In this article we will discuss about currency futures and currency options. Currency Futures: A currency futures contract is "a commitment to deliver a specific amount of a specified currency at a specified future date for an agreed price incorporated in the contract". A currency futures contract is an agreement to buy or sell a standardized quantity of specific foreign [...]