Company A wants to borrow in Euros while company B wants to borrow in Pounds. Company A
Fantastic news! We've Found the answer you've been seeking!
Question:
Company A wants to borrow in Euros while company B wants to borrow in Pounds. Company A Company B GBP 5 % 8 % EUR 4 % 6 % Set a 4-year currency swap for these companies if the gains are to be equally divided between the companies and the swap bank does not charge commission. Calculate the cash flows for a 1,000 [GBP] notional amount if the spot rate is 1.3 [EUR/GBP] and the cash to be exchanged to balance the swap if the exchange rate moves to 1.1 [EUR/GBP]. What happens to the swap bank if the EUR appreciates with respect to the GBP?
Related Book For
Introduction to Derivatives and Risk Management
ISBN: 978-1305104969
10th edition
Authors: Don M. Chance
Posted Date: