How do you FX swap to hedge?
How do you FX swap to hedge? Swap contracts, or swaps, are a hedging tool that involves two parties exchanging an initial amount of currency, then sending back small amounts as interest and, finally, swapping back the initial amount. These are tailored contracts and the exchange rate of the initial exchange remains for the duration of the deal. What is swap hedge? One of the primary functions of swaps is the hedging of risks. For example, interest rate swaps can hedge against interest rate fluctuations, and currency swaps are used to hedge against currency exchange rate fluctuations. How does a...