FRM: Currency swap

Brief illustration of a fixed-for-fixed currency swap (e.g., dollars for euros). Please note: in a plain vanilla interest rate swap, we referred to the NOTIONAL because it is not exchanged (in that case, the notional is required only to compute the interest). However, in a currency swap the PRINCIPAL is exchanged. For more financial risk videos, visit our website at http://www.bionicturtle.com!

FRM: Currency swap

Brief illustration of a fixed-for-fixed currency swap (e.g., dollars for euros). Please note: in a plain vanilla interest rate swap, we referred to the NOTIONAL because it is not exchanged (in that case, the notional is required only to compute the interest). However, in a currency swap the PRINCIPAL is exchanged. For more financial risk videos, visit our website at http://www.bionicturtle.com!

20 thoughts on “FRM: Currency swap

  1. Ory

    I'm confused..

    what is the benefit (or motive) for currency swap? examples would help, because in the case of ASEA and the Chiang Mai initiative not country would have the same principal. So Im trying to determine the benefit they would get from inheriting principal that would be of more cost.

  2. Thumb Drive

    Use this example:

    If a firm in EU wants to open up a subsidary in US and requires USD but USD is more expensive to borrow in EU, and a firm in US wants to open branches in EU and requries EUR bust EUR being more expensive to borrow in US, hence they can swap their loan in their domestic dollars to benefit each other. (Domestic dollars being cheaper to borrow in domestic markets)

  3. Chris Haynes

    This is hard to follow. It would be useful if the author wrote what he was saying down on his presentation.

  4. Lina Neaga

    Okay so just found that fixed-for-fixed would exist if parties have different currencies and ratings in different countries.

  5. Lina Neaga

    Why would companies go into an agreement to exchange the same form of interest rate? (fixed-fixed or floating-floating) For currency? For regular plain vanilla swaps?
    Thanks.

  6. Sukhwinder Singh

    he needs to re-record the clip with a practical example to make useful to people who really wants to learn stuff in life.

  7. yubraj bajracharya

    I have a question, have you wondered this thing called the Intellitus Cash System? (do a google search). My brother says it gets people lots of income.

  8. icmull

    They never said they would. That is like me searching for videos on different dog breeds and then complaining that the guy doesn't discuss cat breeds also. It is so (in this case) they can get a fixed rate in a different country, for example they are trying to enter a new market and don't want to be exposed to changes in the exchange markets (hedging risk).

  9. Noah Hopkins

    I do not understand why you do not give examples in any of your videos. The reason people go and look up these things is for clarification and you sir provide none. Theory is useless without implementation.

  10. GopalaKrishna NarayanMoni

    Hi David, would it be possible to post any of your existing videos on valuation of currency swaps please? Ive been struggling with understanding the logic behind.. thanks a ton as always.

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