TAILIEUCHUNG - Lecture International financial management: Chapter 9 - Currency Swaps

Chapter 9 "Currency Swaps" lecture International financial management introduce to you the content: The swap bank, swap transaction, an example of a currency swap. Invite you to refer to the lecture content more learning materials and research. | CHAPTER NINE CURRENCY SWAPS DEBT RATING BY MOODY S INVESTORS SERVICE STANDARD AND POOR S CORPORATION GENERAL DESCRIPTION Moody s S P s INVESTMENT GRADE Maximum safety Aaa AAA High quality Aa1 AA Aa2 AA Aa3 AA- Upper medium grade A1 A A2 A A3 A- Lower medium grade Baal BBB Baa2 BBB Baa3 BBB- 1 DEBT RATING BY MOODY S INVESTORS SERVICE STANDARD AND POOR S CORPORATION GENERAL DESCRIPTION Moody s S P s NONINVESTMENT GRADE Low grade speculator Ba1 BB Ba2 BB Ba3 BB Highly speculator B1 B B2 B3 B- Substantial risk CCC Caa ccc Extremely speculative Ca ccc-cc Very extremely speculative c c Default D SWAPS CONTRACTS DEFINITIONS In a swap two counterparties agree to a contractual arrangement wherein they agree to exchange cash flows at periodic intervals. There are two types of interest rate swaps - Single currency interest rate swap Plain vanilla fixed-for-floating swaps are often just called interest rate swaps. Cross-Currency interest rate swap This is often called a currency swap fixed for fixed rate debt service in two or more currencies. 1 THE SWAP BANK A swap bank is a generic term to describe a financial institution that facilitates swaps between counterparties. The swap bank can serve as either a broker or a dealer. As a broker the swap bank matches counterparties but does not assume any of the risks of the swap. As a dealer the swap bank stands ready to accept either side of a currency swap and then later lay off their risk or match it with a counterparty. AN EXAMPLE OF AN INTEREST RATE SWAP Consider this example of a plain vanilla interest rate swap. Bank A is a AAA-rated international bank located in the . and wishes to raise 10 000 000 to finance floating-rate Eurodollar loans. Bank A is considering issuing 5-year fixed-rate Eurodollar bonds at 10 percent. It would make more sense to for the bank to issue floatingrate notes at LIBOR to finance floating-rate Eurodollar loans. TRANSACTION Situations confronting counterpart B before swap AN EXAMPLE OF AN INTEREST

• Tài chính doanh nghiệp
• Lesson International financial management
• International financial management
• Currency Swaps
• Swap bank
• Swap transaction
• Currency swap
• Management of translation exposure
• Translation Exposures
• Alternative currency translation methods
• Translation exposure
• Globalization Multinational Firm
• The Multinational Firm
• Multinational Corporations
• Foreign Exchange Risk
• The Balance of Payments
• Balance of Payments Accounting
• Balance of Payments Accounts
• Balance of Payments Identity
• Foreign currency futures market
• Futures Currency
• Transaction Exposure
• Operation exposure
• The derivatives world
• Lecture Derivatives
• Swap price
• Off market swap
• Option contracts
• Hoán đổi ngoại tệ
• Ứng dụng hoán đổi ngoại tệ
• Giao dịch hoán đổi ngoại tệ
• Thực tế hoán đổi ngoại tệ
• Tiểu luận tài chính tiền tệ
• Tiểu luận ngân hàng
• Ngân hàng thương mại
• Chính sách tiền tệ