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By Irfan Ullah (MS MAJU Islamabad)
Difference between swap and future market:
No
Future contract
Swap
1
Traded at exchange
Not
2
No counterparty
Having counter party
3
Clearing house exist
No
4
No risk
Risk of the counter party exist
5
Marked to market
Rarely marked to market
6
Mostly long term contract
Mostly short term
7
Regulated
Unregulated
What else can I help you with?
What is the difference between currency swaps and cross currency swaps?
http://en.wikipedia.org/wiki/Currency_swap
What is a foreign currency exchange agreement?
A foreign currency exchange agreement is a contract between two parties that outlines the terms for exchanging one currency for another at a specified rate and time. These agreements can help manage risks associated with currency fluctuations, facilitate international trade, or hedge against potential losses. They are commonly used by businesses engaged in cross-border transactions or by investors dealing in foreign assets. Such agreements may involve options, forward contracts, or swaps, depending on the parties' needs and strategies.
Why do companies use hedging in international trade?
Companies use hedging in international trade to manage and mitigate financial risks associated with currency fluctuations, interest rate changes, and commodity price volatility. By employing various hedging strategies, such as futures contracts, options, or swaps, businesses can stabilize cash flows, protect profit margins, and enhance budget predictability. This risk management approach helps companies maintain competitiveness in global markets and ensures they can meet financial obligations despite adverse market conditions. Ultimately, hedging supports more informed decision-making and fosters long-term growth.
How derivatives work in a foreign exchange market?
In the foreign exchange (FX) market, derivatives are financial instruments whose value is derived from the underlying currency pairs. Common types of FX derivatives include forwards, futures, options, and swaps, which allow traders to hedge against currency risk or speculate on exchange rate movements. For example, a forward contract locks in a specific exchange rate for a future date, helping businesses manage exposure to fluctuating rates. Overall, derivatives enhance liquidity and provide flexibility for market participants in managing their foreign exchange risk.
What are high-order products?
High-order products refer to complex financial instruments or derivatives that derive their value from multiple underlying assets or factors, such as equities, bonds, or interest rates. These products often involve intricate structures, such as options, swaps, or collateralized debt obligations, and can be designed to meet specific investment strategies or risk profiles. Due to their complexity, high-order products typically carry higher risks and require sophisticated understanding for effective management.
What is a forward commitment?
A forward contract is legally binding promise to perform some actions in the future . Forward commitments include forward contracts , future contracts and swaps
What is an example of a derivative product?
Derivative instruments are classified as: Forward Contracts Futures Contracts Options Swaps
What is the difference between swaps and marshes?
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What is the difference between currency swaps and cross currency swaps?
http://en.wikipedia.org/wiki/Currency_swap
Concept of hedging?
The concept of hedging is to reduce the risk of financial loss. Hedging originated out of the 19th century commodity markets. A hedge can include stocks, exchange-traded funds, insurance, forward contracts, swaps, and options.
How is translation exposure mitigated?
To minimise the risk of translation of foreign assets or liabilities, Futures Contracts could be undertaken. Such as Swaps OR through Hedging
How can swaps be used to reduce the risks associated with debt contracts?
Swaps can be used to reduce risks associated with debt contracts by allowing parties to exchange cash flows based on different interest rate structures or currencies. For instance, an interest rate swap enables a borrower with a variable rate debt to convert it into a fixed rate, thereby mitigating the risk of rising interest rates. Similarly, currency swaps can help manage foreign exchange risk for debt denominated in a foreign currency. By strategically using swaps, entities can better align their cash flows with their financial strategies and risk tolerance.
What has the author Roberto Blanco written?
Roberto Blanco has written: 'An empirical analysis of the dynamic relationship between investment-grade bonds and credit default swaps' -- subject(s): Bonds, Swaps (Finance)
When did Swaps die?
Swaps was born on March 1, 1952, in California, USA.
What libor means in intrnational banking?
LIBOR stands for London InterBank Offered Rate. It is the interest rate at which banks borrow money from one another when they are short of cash or have surplus. The LIBOR is widely used as a reference rate for financial instruments such as · forward rate agreements · short-term-interest-rate futures contracts · interest rate swaps · inflation swaps · floating rate notes · syndicated loans · variable rate mortgages · currencies, especially the US dollar
In a property derivative contract how is a contract valued and on what basis?
As of yet, property derivatives traded are total return swaps. As an example, a notional amount will be contracted to where the cashflows of an index e.g. UK IPD will be swapped for the difference of the index and another asset (most commonly LIBOR). These are priced on a cashflow basis - and expectations going forward!
What is a foreign currency exchange agreement?
A foreign currency exchange agreement is a contract between two parties that outlines the terms for exchanging one currency for another at a specified rate and time. These agreements can help manage risks associated with currency fluctuations, facilitate international trade, or hedge against potential losses. They are commonly used by businesses engaged in cross-border transactions or by investors dealing in foreign assets. Such agreements may involve options, forward contracts, or swaps, depending on the parties' needs and strategies.
