Cross Currency Swap
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cross currency swap
Cross Currency Forex swap
Cross Forex swap Currency swap Foreign exchange option - Similar to an Interest Rate Swap but where each leg of the swap is denominated in a different currency. A Cross Currency Swap therefore has two principal amounts, one for each currency.
Exchange rate used to determine the two principals is the then prevailing spot rate although for delayed start transactions, the parties can either agree to use the forward FX rate or agree to set the rate two business days prior to the start of the deal. With an Interest Rate Swap there is no exchange of principal at either the start or end of the transaction as both principal amounts are the same and therefore net out. For a Cross Currency Swap it is essential that the parties agree to exchange principal amounts at maturity.
A currency swap (or cross currency swap) is a foreign exchange agreement between two parties to exchange a given amount of one currency for another and, after a specified period of time, to give back the original amounts swapped.
A Cross Currency Swap (CCS) enables a user to exchange (or swap)
cross-currency swap
Agreement between two parties to exchange equivalent fixed amounts in two different currencies for a fixed period and then to re-exchange the amounts. For the duration of the swap each party pays interest on the received amount at the prevailing fixed or floating interest rate set in the country issuing the currency. At maturity the fixed principal amounts are re-exchanged.
The reasons for carrying out a currency swap might include: to obtain the use of a currency at a cheaper rate than might be possible through other means; to lock into a specific interest rate; for hedging purposes; or for investment speculation.
What does CIRS stand for?
Cross-Currency Interest Rate Swap (CIRS)
This page was last updated 20/01/2008
This page was last updated 20/01/2008
