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Currency swaps & basis swaps - 2.5 hours

A foundation course that explains the various types of currency and basis swap. This includes how they work, the risks and their importance in pricing hedging transactions.

It is suitable for those working in or around financial markets who need to know more.

There are simple examples with time for questions and answers.

This course is only available in-house and is suitable for up to 12 people.

This is what is covered:

Back-to-back lending in different currencies
Fixed - fixed currency swaps
Fixed – floating currency swaps
Floating – floating currency swaps
The exchange of principal – when and at what rate
Currency swaps and counterparty credit risk
Basis swaps – what they are and how they work
Examples of basis swaps
Why basis risk matters – windfall gains and losses
How basis swaps are used in hedging
How the price of basis swaps needs to be factored into hedging transactions
Examples from the bond and forward foreign exchange markets

Related Documents

elearning > Currency basis swaps

Learn about the following: What a currency basis swap is. How currency basis swaps work. How to read the price quotation. How these swaps influence the price of other deals.

Training Courses > Interest Rate & Currency Swaps

elearning > Currency swaps

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.

A currency swap is really like a back-to-loan. This is where one party lends one currency and borrows another. During the life of the swap interest is paid and received on the currencies borrowed and lent. On maturity there is repayment. The first transactions were in the 1970s where two companies exchanged their domestic currencies in order to borrow foreign currency often at an attractive interest rate. Initially banks earned fees for arranging these deals but soon realised that they could act as a counterparty hedging the transactions through the evolving foreign exchange market.

Market Guides > Spot & forward foreign exchange

12th October 2009

Introduction Foreign exchange is defined as "a claim to a foreign currency payable abroad and may be funds held, bills or cheques". A foreign exchange transaction is, "a contract agreed today between two parties to trade an agreed amount of one currency for an agreed amount of another currency on a future date". When you travel you may be familiar with buying currency at the airport. Because the sums involved are small and paper money is exchanged the differences between buying and selling prices can be wide. You may also be unfortunate enough to pay a dealing fee. Banks, corporates and speculators deal in the professional market. Trades are transacted across electronic platforms and each trade can run into millions of dollars. As a consequence dealing spreads are very narrow and the money is exchanged by credits and debits to bank accounts. Let's find out about the spot and forward markets and the risks involved.

Basis Swaps

11th August 2014

A basis is swap is an interest rate or currency swap where both the payment of interest and receipt of interest are on a variable or floating rate basis. Let’s see three examples: