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A basis swap functions as a floating-floating interest rate swap under which the floating rate payments are referenced to different bases. [ 1 ] [ 2 ] The existence of a basis arises from demand and supply imbalances and where, for example, a basis is due for a borrower seeking dollars, this is indicative of a synthetic dollar interest rate in ...
Non-deliverable Cross-Currency Swap (NDXCS or NDS): similar to a regular XCS, except that payments in one of the currencies are settled in another currency using the prevailing FX spot rate. NDS are usually used in emerging markets where the currency is illiquid, subject to exchange restrictions, or even non-convertible.
In finance, a foreign exchange swap, forex swap, or FX swap is a simultaneous purchase and sale of identical amounts of one currency for another with two different value dates (normally spot to forward) [1] and may use foreign exchange derivatives. An FX swap allows sums of a certain currency to be used to fund charges designated in another ...
Examples of linear IRDs are; interest rate swaps (IRSs), forward rate agreements (FRAs), zero coupon swaps (ZCSs), cross-currency basis swaps (XCSs) and single currency basis swaps (SBSs). Non-linear IRDs form the set of remaining products.
Triangular arbitrage opportunities may only exist when a bank's quoted exchange rate is not equal to the market's implicit cross exchange rate. The following equation represents the calculation of an implicit cross exchange rate, the exchange rate one would expect in the market as implied from the ratio of two currencies other than the base currency.
As OTC instruments, interest rate swaps (IRSs) can be customised in a number of ways and can be structured to meet the specific needs of the counterparties. For example: payment dates could be irregular, the notional of the swap could be amortized over time, reset dates (or fixing dates) of the floating rate could be irregular, mandatory break clauses may be inserted into the contract, etc.
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The Foreign exchange Options date convention is the timeframe between a currency options trade on the foreign exchange market and when the two parties will exchange the currencies to settle the option. The number of days will depend on the option agreement, the currency pair and the banking hours of the underlying currencies. The convention ...