swaps

Description The documentation about derivatives are used as risk management tools by the corporates. Preface This paper examines the different Derivatives instruments that are being used by corporate to hedge their risk. The economic climate and markets can be affected very quickly by changes...

Description The presentation about various financial derivatives. It also explains factors Contributing to the Growth of Derivatives INTRODUCTION TO FINANCIAL DERIVATIVES : Structure and Products • Derivatives transactions are financial contracts. • Derivatives are synthetic instruments •...

I have attached a presentation on SWAPS. Might be of use :wave:

CURRENCY SWAPS Each entity has a different access and different long term needs in the international markets. Companies receive more favorable credit ratings in their country of domicile than in the country in which they need to raise capital. Investors are likely to demand a lower return from...

INVESTMENT SWAPS Investment swaps are investments in a foreign currency asset, which have no foreign exchange risk. In most cases, the risk is eliminated by the execution of a foreign exchange swap. The most common investment swap is not liquid, although a semi liquid swap can be dealt. The...

FOREIGN EXCHANGE SWAPS A basic foreign exchange swap is the simultaneous purchase and sale of one currency for another, where the two contracts have different dates (different positions of same or different amount on different dates). Let’s study the following illustration. An export oriented...

In the late 1970's, the first currency swap was engineered to circumvent the currency control imposed in the UK. A tax was levied on overseas investments to discourage capital outflows. Therefore, a British company could not transfer funds overseas in order to expand its foreign operations...

Jet swaps $340-m floating loan with Credit Lyonnais George Cherian CREDIT Lyonnais and Jet Airways have concluded the largest interest rate swap in the country. A total of $340m of the air tax operator’s outstanding foreign currency floating rate loans has been swapped to fixed/ floating via...

With the introduction of rupee derivatives the Indian corporates can attempt to reduce their cost of borrowing and thereby add value. A typical Indian case would be a corporate with a high fixed rate obligation. Eg. Mehta Ltd. an AAA rated corporate, 3 years back had raised 4-year funds at...

To lower financing cost Currency swaps can be used to reduce the cost of loan. The following example deals with such a case. Consider two Indian corporates A & B. Corporate A is an exporter with a rupee loan at 14% fixed rate. B has a dollar loan at LIBOR + 0.25% floating rate. Due to...

RBI in its slack season credit policy '97 allowed the authorized dealers to arrange currency swap without its prior approval. This was to enable those requiring long-term forward cover to hedge themselves without altering the external liability of the country. Prior to this policy RBI had been...

Rate Swaps The Indian scene Objective • To further deepen the money markets • To enable banks, primary dealers and all India financial institutions to hedge interest rate risks. These guidelines are intended to form the basis for development of Rupee derivative products such as...

There are four major components of a swap price. • Benchmark price • Liquidity (availability of counter parties to offset the swap). • Transaction cost • Credit risk Swap rates are based on a series of benchmark instruments. They may be quoted as a spread over the yield on these...

In the late 1970's, the first currency swap was engineered to circumvent the currency control imposed in the UK. A tax was levied on overseas investments to discourage capital outflows. Therefore, a British company could not transfer funds overseas in order to expand its foreign operations...

A contract between two parties, referred to as counter parties, to exchange two streams of payments for agreed period of time. The payments, commonly called legs or sides, are calculated based on the underlying notional using applicable rates. Swaps contracts also include other provisional...

 Interest Rate Swaps: A standard fixed-to-floating interest rate swap, known in the market jargon as a plain vanilla coupon swap (also referred to as “exchange of borrowings”) is an agreement between two parties in which each contracts to make payments to the other on particular dates in the...

Currency Swaps: In a currency swap, the two payment streams being exchanged are denominated in two different currencies. Usually, an exchange of principal amount at the beginning and a re-exchange at termination are also a feature of a currency swap. A typical fixed-to-fixed currency swaps...

Swaps A swap is an agreement to exchange cash flows at specified future times according to certain specified rules. Most commonly used as an interest rate, exchange rate derivative instrument. Commonly used for conversion from one type (floating/fixed) of interest rate or currency to...

SWAPS Single Currency Swaps INR Swaps USD Swaps Multi Currency Swaps USD/INR Swaps EUR/USD Swaps IRS IRS is an agreement between two counterparties to exchange interest payments on specified dates over a specified period Typically there are 2 variations in Single Currency Swaps...

This chapter discusses currency and interest rate swaps, which are relatively new instruments for hedging long-term interest rate risk and foreign exchange risk.