5014 - Finance of International Trade - Swaps p219 - 236 Flashcards
1
Q
What is a Swap
A
A swap is an exchange of one thing for another
2
Q
What is a Currency Swap
A
Where 2 parties agree to swap or exchange one currency for another.
3
Q
What is the banks role in swaps
A
Act as an intermediary and take a fee for brokering the deal and for acting as a guarantor
4
Q
Advantages of Currency Swaps
A
- Reduce Exchange rate risk
- Available for longer periods than forwards contracts
- Can be arranged for currencies which no forward market exists
- Can get better rates
5
Q
LIBOR
A
Talks about LIBOR but it literally will never be used after 2023, so idfk why I’m paying 9k a year to learn outdated shit
6
Q
Trying to decipher what my lecturer cant explain about Swap Contracts
A
A swap contract is arranged by a bank, with a 3rd party to hedge interest rate risk, slides however are outdated so who tf knows what is supposed to happen, idc
7
Q
Alternate Ways to Hedge Interest Rate Risk
A
- Fixed Rate
- Interest Rate Swap
- FRA Forward Rate Agreement
- Interest Rate Options
- Interest Rate Futures
