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discuss the motives a company may have for engaging in currency and intrest rate swaps
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- Demonstrate how interest rate and currency swaps are constructed and discuss the comparative advantage argument used to illustrate the popularity of swaps.Discuss the risk confronting an interest rate and currency swap dealer in international Markets?How can the company use currency options to hedge against exchange rate risk?
- Explain the foreign currency swaps and why are they undertaken? Explain the functional currency and what is a presentation currency.Discuss well about the exchange Rate Mechanisms of currencies; what does it mean “Independent Float” or “Pegged to another currency” mean? Give example for each.Define spot, forward, and swap transactions in the foreign exchange market and give an example of how each could be used.
- How do companies report foreign currency derivatives, such as forward contracts and options, on the balance sheet?Explain this function of BSP -Liquidity management -determination of exchange rate policy -lender of last resort -Currency IssueWhich hedging strategy uses an exchange rate agreed to today for future delivery of currency to minimize the financial institution’s risk exposure? a. Hedging with forwards. b. On balance sheet hedging. c. Off balance sheet hedging. d. Spot hedging.
- a)explain the structure of a pay-fixed, receive-fixed currency swap, and describe the cash flows at its initiation date, settlement dates, and termination date. b)explain how to determine the notional amounts in two currencies in a currency swap. c)explain the equivalency between a currency swap and a pair of bond transactions in different currencies. d)describe the four types of currency swaps. e)describe the relationship between currency swaps and interest rate swaps.Explore the concept of arbitrage on the currency exchange markets and critically evaluate with examples.Describe who would use a swap and why? How many different types of swaps are they and why? Describe how a company might benefit from interest rate currency swaps?