FX Forward
fixing future currency exchange rate in present day
CRS
exchanges of interest between two currencies
IRS
exchanges of interest between the same currency
FX Forward / SWAP usage
- Means to solve currency risk and settlement problems at expiration
- Ex) Investing US-issued bonds (buying positions), take FX forward sell position positions to prevent loss from KRW revaluation
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- Risk management example
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inform of Position, forecast, Risk Management
Position |
forecast |
Risk Management |
Fixed rate asset |
Rate Hike |
Fixed Rate → Float Rate |