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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 ...
A cross-currency swap's (XCS's) effective description is a derivative contract, agreed between two counterparties, which specifies the nature of an exchange of payments benchmarked against two interest rate indexes denominated in two different currencies.
A cross-currency basis swap (CCBS) sees parties exchange interest rate payments in two different currencies and is often used by traders swapping liabilities to the desired currency.
A currency swap involves exchanging principal and fixed rate interest payments on a loan in one currency for principal and fixed rate interest payments on an equal loan in another currency. Just like interest rate swaps, the currency swaps are also motivated by comparative advantage. Currency swaps entail swapping both principal and interest ...
Three-month euro/dollar cross currency basis swap spreads jumped to -49 basis points, their highest since March 2020, when the pandemic forced the near-complete shutdown of all economic activity ...
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.
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 ...
Cross Currency Swap Valuation, Working Paper 2, HfB - Business School of Finance & Management SSRN preprint. Tuckman B. and Porfirio P. (2003). Interest Rate Parity, Money Market Basis Swaps and Cross-Currency Basis Swaps , Fixed income liquid markets research, Lehman Brothers