Foreign Exchange Swaps or Cross‐Currency Swaps or Cross‐Currency Interest Rate Swaps or …

This chapter discusses cross-currency interest rate swaps that are really a “funding” or interest rate topic. They are very important for the world of international debt issuance. There are many types of foreign exchange (FX) swaps. The most common is simply a standard FX forward trade with an offsetting FX spot transaction. The more interesting type of FX swap is the cross-currency swap or cross-currency interest rate swap or bond swap. These are often used in conjunction with international debt issuance and can result in lower borrowing costs both at home and abroad. Ultimately, though, cross-currency swaps are simply bundling of FX forward contracts, and so introduce nothing new beyond earlier spot-forward valuation relationship; it is useful to keep this in mind for currency swap valuation and revaluation purposes.