February 4
Controlling Risk with a Forex Swap
The concept of a forex swap has its origin in politics. In this actual case, the United Kingdom at one time placed limitations on the exporting of British currency that was met by the invention of short term forex currency trades that permitted commercial needs to by-pass political goals. These swaps are circular in nature, in that the idea is to trade a set amount of currency X for a fixed amount of currency Y today and then trade back the same precise amounts of currencies X and Y at some future agreed upon date.
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