Capital rationing and Near leg: Difference between pages

Revision as of 11:21, 28 November 2017

1. FX swaps.

In an FX swap contract, the initial exchange of currencies.

The currencies are re-exchanged later in the 'far leg'.

2. Repurchase agreements.

In a securities repurchase agreement ('repo'), the initial exchange of securities, to be re-exchanged later in the 'closing leg' or 'far leg'.

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-A situation in which the total availability of capital to a business is limited.
+. ''FX swaps''.
-Leading to the <u>selective</u> acceptance only of positive net present value projects.
+In an FX swap contract, the initial exchange of currencies.
-(Rather than the acceptance of all positive [[net present value]] projects, which is the theoretical value-maximising response in the situation of the unlimited availability of additional capital at current market prices.)
+The currencies are re-exchanged later in the 'far leg'.
+. ''Repurchase agreements''.
+In a securities repurchase agreement ('repo'), the initial exchange of securities, to be re-exchanged later in the 'closing leg' or 'far leg'.
 == See also ==
-* [[Net present value]]
+* [[Closing leg]]
-* [[Profitability index]]
+* [[Far leg]]
+* [[FX swap]]
+* [[Opening leg]]
+* [[Repurchase agreement]]
+* [[Swap points]]