Fx Swaps Explained
1. Context
In this video from FRM Part 1 and FRM Part 2 curriculum, we explore the mechanics of FX swaps, how they work, how they can be intuitively decomposed into simpler instruments and how they can be used in practice (as a way of funding an asset denominated in foreign currency by paying interest in the domestic currency). This video is an addendum to the preparation courses offered by finRGB for FRM Part 1 (https://www.finRGB.com/courses/frm-part-1-online-course) and FRM Part 2 (https://www.finRGB.com/courses/frm-part-2-online-course). The details of the reading in which this topic appears are given below:
| Area | Financial Markets and Products |
| Reading | Foreign Exchange Markets |
| Reference | Chapter 9. Foreign Exchange Markets, Official GARP Books (FMP Section, 2021). |
| Area | Liquidity Risk |
| Reading | Covered Interest Parity Lost |
| Reference | Claudio Borio, Robert McCauley, Patrick McGuire, Vladyslav Sushko, 2016. “Covered Interest Parity Lost: Understanding the Cross-Currency Basis,” BIS Quarterly Review |