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elearning > Currency swaps

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Learn about the following:

What currency swaps are. How currency swaps can be used. How currency swaps are priced. The risks that currency swaps can produce.

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Course Summary

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  • 40 minutes
  • 8 question multiple choice
  • What currency swaps are
  • How currency swaps can be used
  • How currency swaps are priced
  • The risk currency swaps can produce

Currency Swaps - the details

1. How currency swaps work

  • Principal exchange
  • Interest payments
  • Principal re-exchange
  • The three types of currency swap
  • Fixed/fixed, fixed/floating, floating/floating
  • The price of a currency swap 

2. How currency swaps are used

  • Example, raising debt and swapping the currency
  • Why a spot deal creates risk
  • Principal and interest payments
  • The all-in-cost and how it is determined
  • Why swaps can help reduce borrowing costs and diversify funding 

3. Pricing currency swaps

  • How a dealer does this
  • The “rule” of net present value
  • Step-by-step numeric example

4. Currency swaps and risk

  • Mark-to-market value and credit exposure
  • Why movements in the spot rate create credit risk
  • Mitigation through collateral
  • Operational risk-linking swaps to the hedged asset or liability

5. Summary 

6. Test

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