| An arrangement in which two parties exchange a series of cashflows in one currency for a series of cashflows in another currency, at agreed intervals over an agreed period. Companies would do this where they have existing borrowings in a currency which they want to convert into a borrowing in another currency. If the borrowing is at a fixed rate, and is being exchanged for another fixed rate borrowing, the swap is a 'fixed rate currency swap'. Unlike an interest rate swap, a currency swap usually does involve an exchange of the principal borrowed amount as well as the interest payments.
|
