Classic swaps

Report - is the sale of foreign currency on spot terms and conditions of the simultaneous buying on forward. Backwardation - the purchase of currency on spot conditions and conditional sale forward. There are other possible combinations: a double-type operation forward, signed with the same conditions at different times, can also be used in the management of currency positions and are called "forward swap". For example, the forward transaction of foreign currency, concluded for a period of one month, is balanced by a forward transaction to sell the same amount of currency in three months. Thus, the assets and liabilities in foreign currency are balanced, and the foreign exchange position for a month remains closed. Such operations can be carried out with various derivatives - forwards, futures, options, swap contracts - in any combination. The most effective management tool, suitable for quick adjustment of positions are immediate exchange transactions, ie futures and options. If the regulation of foreign exchange position on the exchange agreement has been concluded, the bank can at any time free from obligations undertaken under contract by an opposite in the sense of exchange operations. Category: Management Operations Commercial Bank