General Information

Currency Swaps

A swap transaction is one that combines a spot transaction
and a forward transaction, with both being concluded at the same time.


To extend a spot, forward or swap transaction beyond maturity, to facilitate cash management.

Market Expectation


Brief Description

If you are unable to deliver foreign currency on the date a forward sale falls due, you can extend the maturity by means of a swap transaction. A short-dated sale is used to offset the existing forward transaction. The "old" forward position is moved to a new date by means of the new forward sale. A discount will result if the sold currency has a higher level of interest than the purchased currency. The cost of extension corresponds to the interest rate difference. It should be noted that cash flow differences may arise as the extension is concluded at current daily exchange rates. A profit or loss can result as compared to the original forward rate. With the exception of the interest rate difference, however, this will be offset at the new maturity date. It is also possible to shorten the duration of a previous forward transaction.

Profit Potential

None; the interest rate difference determines costs and earnings


None, as price hedged

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