Brief illustration of a fixed-for-fixed currency swap (e.g., dollars for euros). Please note: in a plain vanilla interest rate swap, we referred to the NOTIONAL because it is not exchanged (in that case, the notional is required only to compute the interest). However, in a currency swap the PRINCIPAL is exchanged. For more financial risk videos, visit our website at http://www.bionicturtle.com!
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what is the benefit (or motive) for currency swap? examples would help, because in the case of ASEA and the Chiang Mai initiative not country would have the same principal. So Im trying to determine the benefit they would get from inheriting principal that would be of more cost.