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Swap Reinforcement Now try these A blast from the past.

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Presentation on theme: "Swap Reinforcement Now try these A blast from the past."— Presentation transcript:

1 Swap Reinforcement Now try these A blast from the past

2 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 231.70 – 232.70 90 day points 301 424 90 day GBP 8.8125 – 8.6875

3 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)

4 Swap Reinforcement So, lets use ESC 10,000,000 T0 T90 ESC 10,000,000 ESC ? GDR Bank ESC 10,000,000 Spot at 231.70 Fwd at 234.71 E10,000,000 GBP 43,159.26 GBP 43,159.26 x.o.086875 x 90/365 = 924.52 + principal = 44,083.78 E10,346,905.05 GBP 44,083.78 E10,346,905.05

5 Swap Reinforcement So the interest rate that could be offered is E10,346,905.05 – 10,000,000 = 346,905.05 346,905.05 x 360 x 100 = 13.88 10,000,000 90

6 Swap Reinforcement 2 The Rolling Hedge Problem To T180 6 month points 43 45 Note it is a NB/ Base quote So how many points? 45 points, a cost Base

7 Swap Reinforcement 2 The Rolling Hedge Some further information 1 month points 4 - 5 3 month points 19 – 20 Any ideas?

8 Swap Reinforcement 2 The Rolling Hedge Some further information 1 month points 4 - 5 3 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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