International Financial Management: An Analytical Framework

CHAPTER 8

Financial Swaps

CHAPTER OBJECTIVES

After studying this chapter, you should be able to:

1. Review the importance of financial swaps as risk management tools as well as profit-generating strategies.
2. Explain the concept of financial swaps and trace their evolution.
3. Understand various types of interest rate swaps and highlight the role of the intermediary in interest rate swap deals.
4. Explain the concept of forward rate agreement.
5. Highlight the importance of other derivative products like swaptions, caps, floors, and collars.
6. Explain the nature and importance of currency swaps.
7. Understand the nature of foreign exchange swaps.
8. Illustrate the determination of swap values.
9. Gain insight into credit default swaps.

Introduction

With the integration ...