Currency swap parties exchange currencies, and their respective creditor-debtor relationships have not changed. The exchange rate of the initial swap is calculated according to the agreed spot exchange rate. The purpose of currency swap is to reduce financing costs and prevent losses caused by the risk of exchange rate changes. The conditions of currency swap are the same as those of interest rate swap, including the existence of overweight differences and opposite financing willingness, in addition to preventing exchange rate risks.
Extended data:
Using currency swaps involves three steps:
The first step is to determine the existing cash flow. The purpose of swap transaction is to convert risks, so the existing risks should be defined accurately first.
The second step is to match the existing positions. Only when the status of the existing position is clear can the second step be carried out to match the existing position. Basically, all hedgers follow the same principle, that is, hedging risks in the same direction as existing positions, which is called swap.
What happened in the transaction. The existing position is offset by another position with the same number but opposite direction. Therefore, the existing risks are eliminated by matching or hedging.
The third step of swap transaction is to create the required cash flow. If the hedger wants to convert the risk through swap, he can offset it before creating it in the first two steps of swap. Matching the existing position and creating the required cash flow is the swap transaction itself, and determining the existing position is not a swap transaction, but a part of the hedging process.
Swap right is an interest rate swap or currency swap transaction with option structure. Specifically, both parties to the option transaction reach an agreement on all relevant contents of the interest rate swap or currency swap transaction, but the option purchaser has the right to decide whether the above swap transaction will take effect on a certain date in the future (European option) or in a certain period of time in the future (American option). As the price of obtaining this right, the option buyer needs to pay a certain handling fee to the option seller.
Using this product, the debtor can get more flexible protection under the premise of paying a certain fee, that is, when the market develops in an unfavorable direction, the swap transaction can take effect according to the pre-agreed level, thus locking in the risk; When the market situation develops in a favorable direction, you can choose not to execute the option, so as to lock in the risk at a more favorable opportunity.
Baidu encyclopedia-currency swap
Baidu encyclopedia-currency swap transaction