Swap Contracts Making Use Of It At Forex

By Ashis Jain


The swap contract involves two parties that engage themselves in transacting a deal agree to exchange their respective cash flows or financial assets on which they have decided to trade at Forex. According to pre-arranged formula the party are known to exchange cash flows, which is a private management between the two parties.

Counter parities is the term given to the parties that are involved in the swap contracts. In the swap, one party agrees to exchange his set of the currency pair or cash flow with the pre-decided set of cash flows of the other party.

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With this kind of investment, swaps are used in exchange of the source of investment to maintain the cash flow or currency pairs in terms of Forex to be exchanged within the support of the swap dealer. There are a number of characteristics involved in a swap contracts.

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The transaction in which one party one party agrees to pay a series of payment to the other party at the periodical date and value at the exchange of the payment from the other party in different currencies is called a currency swaps. In this the cash flows of different countries are swapped. The firms that operate using one currency but need to borrow in other currency are found to use the swap contracts. In the currency swap contract a party holds one currency and swaps it into another currency that is held by another party.

Interest rate swaps is also similar to the currency swap contracts in this one party makes a series of payments to the other party on the determined dates in the form or interest at different rates. Floating rate is one interest rate that is variable, it simply means that the rate of interest at which the payment will be made in not fixed.




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