FOREIGN CURRENCY SWAPS

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SUMMARY

This module enables participants to describe the structure of a foreign currency swap. The development of the foreign currency swaps market and how it relates to foreign exchange exposure management is reviewed.

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OBJECTIVES

Upon completion of this module, participants will be able to:

1. Describe the structure of a foreign currency swap.

2. Identify how a foreign currency swap manages exchange rate risk.

3. Identify the sources of quoting conventions in foreign currency swaps.

4. Describe the uses and benefits of foreign currency swaps.

5. Discuss the role of arbitrage in foreign currency swaps.

6. Contrast parallel loans and foreign currency swaps.

7. Describe how foreign currency swaps can be used to lock in foreign exchange gains.

8. Compare coupon with zero coupon foreign currency swaps.

9. Identify the risks of foreign currency swaps.

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