Collateral swap and Currency risk: Difference between pages

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A collateral swap is an informal name for collateral transformation.
The risk of losses or other adverse effects resulting from a change in a foreign exchange rate, or from other unfavourable changes in relation to a foreign currency.  


Collateral transformation is a key part of central banks' liquidity insurance role in financial markets.


Examples include:


Collateral transformation allows participating banks to temporarily exchange less liquid forms of collateral, for collateral which is more liquid.
*A final receipt/payment of a different amount of domestic currency equivalent, than expected when a currency transaction was committed to (transaction risk)
*A change in asset/liability values in a balance sheet, profit/loss in an income statement (translation risk)
*A change in competitiveness as rates change relative to buyers, suppliers or competitors (economic risk).  




==See also==
A more complex area of foreign exchange risk concerns contingent, or pre-transaction risk.
*[[Collateral]]
 
*[[Collateral transformation]]
 
*[[Liquidity]]
Also known as Currency exposure or Foreign exchange risk.
*[[Liquidity insurance]]
 
*[[Repo]]
 
*[[Sterling Monetary Framework]]
== See also ==
*[[Stress]]
* [[Contingent risk]]
* [[Cross-currency interest rate swap]]
* [[Currency]]
* [[Currency management]]
* [[Redenomination risk]]
* [[Foreign exchange risk]]
* [[Transaction exposure]]
* [[Translation exposure]]
 
 
===Other links===
[http://www.treasurers.org/node/5281 Currency risk, Will Spinney, ACT 2009]
 
[[Category:Manage_risks]]

Revision as of 17:56, 12 November 2016

The risk of losses or other adverse effects resulting from a change in a foreign exchange rate, or from other unfavourable changes in relation to a foreign currency.


Examples include:

  • A final receipt/payment of a different amount of domestic currency equivalent, than expected when a currency transaction was committed to (transaction risk)
  • A change in asset/liability values in a balance sheet, profit/loss in an income statement (translation risk)
  • A change in competitiveness as rates change relative to buyers, suppliers or competitors (economic risk).


A more complex area of foreign exchange risk concerns contingent, or pre-transaction risk.


Also known as Currency exposure or Foreign exchange risk.


See also


Other links

Currency risk, Will Spinney, ACT 2009

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