In international finance, monetary exchanges are a constant event. Interest rate and currency swaps are two forms of exchanging cash flow. Interest rate swaps occur when money is exchanged over a contract that has fixed obligations within the same currency. Currency swaps have the same contractual obligations, however, they occur when money is exchanged across the different currencies.
Consider when it would be best for a company to use both types of financial swaps. With these thoughts in mind, address the following:
- Evaluate how businesses and investors use an interest rate swap or a currency swap as a hedging strategy.
- In your opinion, when should a business or investor use an interest rate swap and a currency swap? Support your response with this week’s Learning Resources.
By Day 4
Reada brief statement.
Read a selection of your colleagues’ postings.