imported>Doug Williamson |
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| ''FX swaps''
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| The difference between the exchange rates applied to the near leg and the far leg of a foreign exchange (FX) swap.
| | An arrangement where the right is given to sell a product or to run a business. |
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| The definition and pricing of FX swaps are discussed in more detail on the page [[foreign exchange swap]]s.
| | Concessions are generally time-limited and often granted for particular geographical regions. |
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| | In retail businesses, concessions may be given in a building belonging to another retail business. |
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| <span style="color:#4B0082">'''Example 1: Low side points'''</span>
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| The spot exchange rate is:
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| GBP 1 = 1.6000 - 1.6010 USD.
| | A preferential allowance or rate, such as a tax concession. |
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| The forward points - also known as the swap points - are 5-8.
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| The <u>outright</u> forward exchange rate quote is:
| | 3. ''Law - contract - negotiation.'' |
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| GBP 1 = 1.6005 - 1.6018 USD.
| | Something that is given up in negotiation, generally in order to accelerate agreement. |
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| The pricing of a related FX swap contract would be favourable for the price-taker (compared with an outright spot exchange and an outright forward contract) for example as follows.
| | ==See also== |
| | * [[Concessionary]] |
| | * [[Concessionary tax rate]] |
| | * [[Contract]] |
| | * [[Franchise]] |
| | * [[Law]] |
| | * [[New issue concession]] |
| | * [[Tax]] |
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| | | [[Category:Accounting,_tax_and_regulation]] |
| For a customer selling USD in the near leg and BUYING back a related amount of USD in the far leg.
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| The swap points would be +5 (because these are the points applying to calculate an outright forward BUYING rate for a client buying USD forward).
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| The swap points of +5 applied to calculate the differential between the near leg rate and the far leg rate would produce, for example:
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| NEAR LEG: Sale of USD at rate of USD 1.6000 per 1 GBP.
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| FAR LEG: Buying USD at a rate of USD 1.6005 per 1 GBP.
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| The selling rate of USD 1.6000 in the Near leg is better for the price taker, compared with the outright spot selling rate of USD 1.6010 per 1 GBP.
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| (The customer pays away fewer USD in the near leg, per 1 GBP received.)
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| <span style="color:#4B0082">'''Example 2: High side points'''</span>
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| For a customer buying USD in the near leg and SELLING back a related amount of USD in the far leg.
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| The swap points would be +8 (because these are the points applying to calculate an outright forward SELLING rate for a client selling USD forward).
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| The swap points of +8 applied to calculate the differential between the near leg rate and the far leg rate would produce, for example:
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| NEAR LEG: Buying USD at rate of USD 1.6010 per 1 GBP.
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| FAR LEG: Selling USD at a rate of USD 1.6018 per 1 GBP.
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| The buying rate of USD 1.6010 in the Near leg is better for the price taker, compared with the outright spot buying rate of USD 1.6000 per 1 GBP.
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| (The price taker RECEIVES more USD in the near leg, per GBP 1 paid away.)
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| == See also ==
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| * [[CertFMM]]
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| * [[Cross-currency interest rate swap]]
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| * [[Far leg]]
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| * [[Forward points]]
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| * [[Foreign exchange swap]]
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| * [[Near leg]]
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| * [[Points]]
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| * [[Swap rate]]
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| [[Category:Financial_management]] | |
| [[Category:Manage_risks]]
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| [[Category:Cash_management]]
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1.
An arrangement where the right is given to sell a product or to run a business.
Concessions are generally time-limited and often granted for particular geographical regions.
In retail businesses, concessions may be given in a building belonging to another retail business.
2.
A preferential allowance or rate, such as a tax concession.
3. Law - contract - negotiation.
Something that is given up in negotiation, generally in order to accelerate agreement.
See also
