(ForeignExchangeSwap) is an agreement between two parties to exchange A for A certain amount of currency B and reverse exchange currency B for the same amount of currency A at A agreed future date at A agreed price.
Swaps come in a variety of flexible forms, but are essentially products.
The party that first converts into a currency with a higher interest rate must compensate the other party. The amount of compensation depends on the difference in interest rates between the two currencies. The compensation can be reflected in the exchange price at maturity or in the form of a separate payment spread.
The functional features of foreign exchange swap are as follows: the client entrusts the bank to buy currency A and sell currency B, and then conducts the reverse operation on another working day in the future, selling currency A and buying currency B with the same amount.
If the customer needs to deliver in advance for some reason, or cannot deliver in time due to insufficient funds or other reasons, and needs to extend the term, the customer can adjust the delivery time of the original transaction by selling foreign exchange swaps.
A foreign exchange swap transaction can be regarded as consisting of two foreign exchange transactions with the same transaction amount, different starting date and opposite trading direction. Therefore, a foreign exchange swap transaction has two starting date and two agreed level of foreign exchange swap.
In foreign exchange swap trading, the customer and the bank convert one currency into another currency at the agreed exchange rate and deliver the funds on the first starting date, and convert the two currencies in opposite directions at the other agreed exchange rate and deliver the funds on the second starting date.
The most common type of swap is a spot transaction combined with a forward transaction, which is equivalent to buying forward A currency and selling forward B currency in the opposite direction while selling spot A currency and buying forward B currency.
The New Year will be the market holiday, the Fed is about to start trimming.
Please pay attention to the specific operation, the market is changing rapidly, investment needs to be cautious, the operation strategy is for reference only.
