The specific functions of swap transaction are as follows: 1. It is conducive to hedging for importers and exporters.
In addition to importers and exporters, multinationals often use hedging to keep the domestic value of foreign currency assets and bonds on the company’s balance sheet constant.
2. It helps securities investors to convert and avoid the risk of change.
Swaps allow investors to convert idle currencies into currencies they need and then use them to gain profits.
3. It helps the bank to eliminate the exchange rate risk incurred by the forward transaction with the customer alone.
Swap transaction can eliminate the exchange rate risk of individual forward exchange with customers, balance the delivery date structure of spot trade and forward trade, and rationalize the structure of bank assets.
