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Published byAustin Soto Modified over 2 years ago

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Swap Reinforcement Now try these A blast from the past

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Swap Reinforcement A Greek has Portugese Escudos which they wish to deposit with a British bank for three months. Given the following rates up to what rate of interest may the Greek expect to receive? Spot GBP/ESC – day points day GBP –

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Swap Reinforcement Question. What will the British bank do with the Escudos which it does not really want? Answer. Swap into a currency it does want, GBP (everyones favourite)

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Swap Reinforcement So, lets use ESC 10,000,000 T0 T90 ESC 10,000,000 ESC ? GDR Bank ESC 10,000,000 Spot at Fwd at E10,000,000 GBP 43, GBP 43, x.o x 90/365 = principal = 44, E10,346, GBP 44, E10,346,905.05

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Swap Reinforcement So the interest rate that could be offered is E10,346, – 10,000,000 = 346, , x 360 x 100 = ,000,000 90

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Swap Reinforcement 2 The Rolling Hedge Problem To T180 6 month points Note it is a NB/ Base quote So how many points? 45 points, a cost Base

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Swap Reinforcement 2 The Rolling Hedge Some further information 1 month points month points 19 – 20 Any ideas?

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Swap Reinforcement 2 The Rolling Hedge Some further information 1 month points month points 19 – 20 T0 T180 T30 5 pts new T0 New T30 5 pts New To New T30 5 pts New T0 T90 20 points Total 35 points

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