28 Nov
Currency Swaps | CA Final SFM
1. Meaning
Currency Swaps refer to the arrangement where principal and interest payments in one currency is exchanged for such paymentsin another currency.
2. Features
The principal amount for both the Companies are equal or almost equal based on the exchange rate prevailing on the date of starting the swap arrangement.
3. Benefits
This willguard against exchange rate risk for both the enterprises andeliminates uncertainties, for both the parties.
4. Types
Currency Swaps can categorized based on how interest rates are structured
(a) FixedFor Fixed Currency Swap: The interest payments exchanged are payable under Fixed RateBasis for both the contracting parties.
(b) Fixedfor Floating Currency Swap: Interest payments exchanged are payable under Fixed Rate Basisfor party and Floating Rate basis the other party.
(c) Floating for Floating Currency Swap: Interest payments exchanged are payable under Floating Rate Basis for both the parties. However, the base for fixing the floating rates are the same for both the parties, i.e. LIBORor MIBOR etc.
A currency swap allows the two counterparties to swap interest ratecommitments on borrowings in different currencies.
Ineffect a currency swap has two elements:
- An exchange of principal in different currencies, which are swapped back at the original spot rate.
- An exchange of interest rates – the timing of these depends on the individual contract
Tips by CA Harish Wadhwani (Scored 93 marks in SFM)
February 02, 2021
Securitization CA Final SFM (Strategic Financial Management)
February 02, 2020
Things you should do before your CA Final Exams
April 04, 2019
Latest Posts
Tips by CA Harish Wadhwani (Scored 93 marks in SFM)
Congratulations…!! CA Harish Wadhwani for scoring 93 marks in SFM (CA Final)
Securitization CA Final SFM (Strategic Financial Management)
Securitization CA Final SFM Securitisation a chapter in Strategic Financial Management (SFM). This is an important chapter from the CA Exam point of view as well. The concept has been explained with a comprehensive example, to make sure the concepts are very clear. It mainly talks about Debt Securitisation, Mortgage-Backed Securities, Securitisation Process, Credit Rating Continue reading
Things you should do before your CA Final Exams
Things you should do before your CA Final Exams Clearing CA Final Exam is clearly not a simple cake walk. You need to be extremely committed to attending your CA final coaching classes. As the subjects are numerous, you need to study your lessons as and when they’re taught your respective CA final Coaching class. Continue reading
CA Final SFM, quick preparation tips
CA final SFM has a few topics which carry a fine weight-age in each trial which are Foreign Exchange Risk Management, Capital Budgeting, Derivatives, and Portfolio Management. But in its place of starting with a topic keeping huge concepts start with a bit lighter note and extremely interesting niche i.e. Bold Valuation. Thereafter full acquisition Continue reading
Two Way Quotes | Forex | CA Final SFM
A Two way Quote indicates a set of two different rates of exchange known as Bid Rate and Ask Rate. In a Two Way Quotes, the rate at which bank will buy the currency and the customer will sell the currency is known as Bid Rate. The rate at which bank will sell the Continue reading
What is an Exchange Rate | Direct Quote & Indirect Quote
Exchange Rate A rate at which one currency can be exchanged with the other. It is a rate at which one currency expressed in terms of the other. It is a rate at which a currency can be bought or sold. Direct Quote & Indirect Quote
Corporate Valuation Basics | CA Final SFM
Need for Corporate Valuation Along with the enterprise growth, number of stakeholders also grows. Presentation of annual financial statements becomes. Curiosity of the stakeholders to understand the ‘true worth’ of their enterprise becomes translated to the concept of ‘valuation’. The market analysts, financial intermediaries, and the academicians, also attempt to apply their valuation approaches Continue reading
Interest Rate Futures | Derivatives | CA Final SFM
When Forward Interest Rate Agreements are regulated through the “Exchange”, it will become Interest Rate Futures. However, the mechanism of IRF is different from FRA. The system is designed in a manner that interest rate is made up as a marketable product. The following example, will clarify as to how interest rate futures are Continue reading
