FX Swaps Explained | FRM Part 1, FRM Part 2 | CFA Level 1, CFA Level 3

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In this video from FRM Part 1 and FRM Part 2 curriculum, we explore the mechanics of FX swaps, how they work, how they can be intuitively decomposed into simpler instruments and how they can be used in practice (as a way of funding an asset denominated in foreign currency by paying interest in the domestic currency). This video is an addendum to the preparation courses offered by finRGB for FRM Part 1 (www.finRGB.com/courses/frm-pa...) and FRM Part 2 (www.finRGB.com/courses/frm-pa....

Опубликовано:

23 июл 2024

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Комментарии : 29

@finRGB 3 года назад

*FRM Learning Objectives:* Compare outright (forward) and swap transactions (FRM Part 1). Differentiate between the mechanics of foreign exchange (FX) swaps and cross-currency swaps (FRM Part 2).

@Ash-lq9cr 3 года назад

Can you make separate video on Differentiate between the mechanics of foreign exchange (FX) swaps and cross-currency swaps (FRM Part 2)

@kaliemarie 6 месяцев назад

The best explanation of FX swaps! Thank you very much.

@jamescogan2716 8 месяцев назад

Unbelievably clear and helpful to curious layman. Thanks.

@Empirical-Skeptic 2 года назад

What a clear and concise explanation of fx swaps. Brilliant!

@reemhameddarwesh9388 Год назад

Amazing and sooooo helpful . Thank you so much

@SaviJawa 2 года назад

Thanks a lot🙏

@WA-hq6ls Год назад

Thank you sir

@saurabhkumar-gg9dd 2 года назад

Great video, very informative! Can you also explain how do we perform B/S and S/B swap for deriving cash rate from spot rate

@playwithvihaan7446 2 года назад

Great Explanation. Please upload av Video on Different types of Forex transaction in detail. Thank you so much.

@alanPinto-fo8sp Месяц назад

@finRGB , So the notional value won't change as the FX rates are locked in at the beginning and since EUR/USD has their own interest rate (Interest rate parity). Won't it have two risk: 1) Interest rate fluctuation risk 2) FX currency risk (where proceeds are received in quote currency and to covert the the same in base currency?

@PB-lb4kj 6 месяцев назад

Why did we divide the spot + fwd rate by 10000

@rehanraja3863 2 года назад

can we apply hedge accounting for FX swap?

@5kplamse Год назад

hi, in regards to your fwd contract. what happens if one year later the firm does not have 10 million euros to pay back ?

@howwtoacademy 3 года назад

Great explainer video .At 2:50 , what does taking up long position means ?

@finRGB 3 года назад

Hello Aram, it means that you are buying Euro and if it appreciates against USD, you will gain.

@csrcaesar 2 года назад

When you sell a position, you are shorting the position. When you buy a position, you are long the position. You short a position that you expect to go down in value. You Long a position when you expect a position to go up. For e.g. You expect Apple shares to go up. You buy 100 shares. Now you are long Apple & Short USD(implicitly). Meaning you expect better returns in Apple stock than USD(cash as deposit etc..) Hope it is clear.

@youngsingtan5973 2 года назад

Why is the rate = 1.2 + 179.1 / 10000? Where did the 10000 come from?

@finRGB 2 года назад

It comes from the convention followed in forex markets. The 179.1 should be interpreted as number of "points", with each point being equivalent to 1/10,000 (hence the multiplication by 1/10,000 before adding to the spot exchange rate).

@nanettetabuac9651 2 года назад

i dont get the arithmetic

@nanettetabuac9651 2 года назад

i got it!! Thanks for the very helpful explanation.

@mufasa6272 4 месяца назад

Great presentation, thank you sir, but can you tell me why u divided by 10,000 to get the fwd rate?

@finRGB 4 месяца назад

This is because forward exchange rates are quoted in points over and above the spot exchange rate. Before adjusting the spot, you need to divide the quoted amount by 10,000.

@mepwn5248 5 месяцев назад

The firm has to pay 12.24m and is receiving 12.17m from the fx swap, how in the net diagram is it making +0.05m , instead of -0.05m

@finRGB 5 месяцев назад

The net diagram shows the 0.05 as a "downward pointing" arrow.

@PB-lb4kj 6 месяцев назад

Mathematically adding spot rate to fwd rate 1.20 + 179.10 should be 180.30. How is it added to become 1.217910?

@finRGB 6 месяцев назад

Because the forward exchange rate "quotes" are in terms of no. of points. As a convention, the number of points needs to be first divided by 10,000 before adding to the spot rate to arrive at the precise forward exchange rate.

@PB-lb4kj 6 месяцев назад

Thanks for explaining so well.