Why would one company with interest payments due in pounds sterling want to swap those payments for interest payments due in U.S. dollars?
Answer to relevant QuestionsHow does organized exchange trading in swaps remove any risk that the counterparty in a swap agreement will not complete the agreement? What happens to the premium you paid for the above option in the event you decide to let the option expire unexercised? What happens to this amount in the event you decide to exercise the option? What were the main causes of Russia’s crisis of 1998? What lessons were learned and what steps were taken to normalize Russia’s economy? Infrastructure weakness was one of the causes of the emerging market crisis in Thailand in 1997. Define infrastructure weakness, and explain how it could affect a country’s exchange rate. Diagram the life span of an exposure arising from selling a product on open account. On the diagram define and show quotation, backlog, and billing exposures.
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