From the point of view of life, a shopping voucher in a store is useless to you. It just happens that someone else is going to this store, and you have to go to the store where that person has a shopping voucher. So you two exchange shopping vouchers, and each of you gets the biggest benefit.

In this way of thinking, but in financial swap, currency, probability, exchange rate swap and so on. I believe you are so clever that you should be able to write clearly.

ship's crew

2. The characteristics of financial swaps

Since the emergence of financial swap, its development has never stopped, so its characteristics are also developing dynamically. To sum up, the characteristics of financial swaps are as follows: the most basic types of financial swaps refer to currency swaps and interest rate swaps. The former refers to the agreement that both parties agree to exchange principal and interest in different currencies on the basis of the expectation of future exchange rate. Its main points include: the two parties exchange the relevant principal at the agreed exchange rate; Swap transactions in which interest is paid according to the agreed interest rate and principal every six months or every year; When the agreement expires, the original currency will be exchanged at the pre-agreed exchange rate. The latter means that both parties exchange interest payments in the same currency according to the agreed date and interest rate on the basis of the expectation of future interest rates. The most basic form of interest rate swap refers to changing fixed interest rate into floating interest rate, that is, one party changes fixed interest rate debt into floating interest rate debt and pays floating interest rate; The other party will exchange the floating interest rate debt for the fixed interest rate debt and pay the fixed interest rate. On this basis, new varieties of financial swaps are constantly emerging, among which cross-currency interest rate swaps are typical, which makes the swaps form a complete category (see table 1), showing diversified characteristics.

Table 1 Basic types of interchange

Attached Figure When financial swaps are combined with other financial instruments, many complex swap derivatives can be derived, such as swap options, swap futures and stock index swaps. Take swap options as an example, it refers to options that pay a fixed interest rate in swap transactions. The swap option contract gives the option buyer the right to choose whether to swap on or before the specified date according to the pre-agreed conditions. This right can be exercised within the prescribed time limit or waived. It can be seen that swap options provide great flexibility for financial institutions and enterprises to manage assets and liabilities. Because before the emergence of swap options, people can only hedge interest rates by paying bonds through on-site trading options or over-the-counter trading options. There are many kinds of swap options, such as callable swap, deferrable swap, sellable swap and cancelable swap. Their trading nature is the same, and they are all developed on the basis of call options and put options. Another example is stock index swap, which means that the two sides of the swap reach an agreement to exchange the payment linked to the change of a stock index with the payment based on the short-term interest rate index. Mainly used to replace direct investment in the stock market, but users also have to bear the risk of stock index changes. Its basic structure is shown in figure 1:

Figure 1 Basic structure of stock index swap

attached drawing

When the stock index rises, the bank pays the stock index+price difference (basis point) to investors.

When the stock index falls, investors pay the stock index-price difference (basis point) to the bank.

Dollar London Interbank Offered Rate

USD LIBOR +35 basis points

Asset swap is also an important form of swap developed on the basis of basic swap. Asset swap refers to repackaging a fixed-rate security into a floating-rate security, repackaging a floating-rate security into a fixed-rate security, or converting the debt repayment currency of a security into another currency. Asset swap can bring higher returns to investors, further diversify the investment portfolio of financial institutions and reduce the risk of investment portfolio. As an important financial derivative product, financial swap is mainly produced to avoid financial risks. However, in the process of development, there are many risks in financial swap itself, so strengthening risk management, reducing the amount of risks as much as possible and preventing risks from becoming actual losses runs through the whole process of swap business. From the causes of risks, swap risks mainly come from: first, economic factors, mainly changes in interest rates and exchange rates; Second, political factors, such as changes in a country's political system, have caused large fluctuations in financial market prices; Third, operational factors, such as excessive speculation and imperfect internal control mechanism; Fourth, other factors, such as natural factors and social factors. From the perspective of risk performance, because the main participants in the swap include intermediaries and end users, the risks they face are different. For intermediaries, the first risk they face is credit risk. Once an intermediary is a market maker, it will also face market risks when holding corresponding positions. Therefore, credit risk and market risk are the main risks of swap intermediaries. Other risks, such as national risks, legal risks and settlement risks. It also has an impact on the intermediary. For the end user, if another end user defaults in a swap transaction involving an intermediary, the contract between the end user and the intermediary is still valid. Therefore, as end users, we can ignore credit risk and regard market risk as the main risk that needs to be monitored and managed. From the perspective of risk management strategy: first, the valuation of swap contracts is carried out in the whole process. The valuation of the swap contract occurs after the signing of the swap contract, which is to calculate the value of the held position and its changes, with the purpose of monitoring possible gains and losses and carrying out risk management. Only by accurately valuing swap contracts and constantly adjusting their expectations according to changes in market conditions during the implementation process can we prevent the expansion of risks and minimize them. The second is to adopt different strategies for different risks: generally speaking, the measures to prevent credit risks are to choose companies that can perform their duties as scheduled no matter how the market exchange rate or interest rate changes; To guard against market risks, it is required to accurately predict the future trend of market exchange rate or interest rate, or sign a swap agreement in the opposite direction to the original agreement to prevent further expansion of market risk losses, or transfer or sell the original swap agreement to slow down market risk losses.

Figure 2 Outstanding interest rate and nominal principal of currency swap ($654.38+0 billion)

As two basic forms of exchange, the attached figure shows that currency exchange came into being before interest rate exchange. Both of them have their own advantages and characteristics, but they show obvious imbalance in their development. The development speed of interest rate swap far exceeds that of currency swap and becomes the mainstream of swap market (see Figure 2). The main reason is that the international lending market, especially eurodollar market, is very vast. At the same time, from the internal structure, compared with interest rate swap, because currency swap involves a series of principal and interest swaps in different currencies, it often takes longer to reach a currency swap agreement and the documentation is more complicated. From the perspective of new products, the development of the two is also unbalanced: currency swap involves the exchange of principal in different currencies and interest in a series of different currencies, so there are few new products in the international financial market, mainly including fixed interest rate currency swap, floating interest rate currency swap and installment currency swap; New products of interest rate swap emerge one after another, such as zero interest rate to floating interest rate swap, floating interest rate to floating interest rate swap, callable interest rate swap, sellable interest rate swap, deferrable interest rate swap and forward interest rate swap.

Source: BIS has low transparency because financial swap is an off-balance-sheet business, and it is an over-the-counter transaction, and the standard contract can be modified through consultation. So far, regulators in various countries have not put forward a very effective method specifically for the supervision of financial swaps. At the same time, a swap transaction often involves different institutions in two or more countries, which inevitably requires the internationalization of swap supervision. As mentioned above, the main risks of swap transactions include credit risk and market risk, so the supervision of swap transactions is actually the supervision of the above two risks. At first, regulators focused on the supervision of credit risk, but with the gradual development of transactions, regulators found that swap transactions often have a great impact on the bank's business activities. Therefore, they pay more and more attention to market risk as the focus of supervision. In the international supervision of swap transactions, the Bank for International Settlements and the Basel Committee have played an important role. For example, the Basel Accord, the core standard of international capital measurement and capital adequacy ratio promulgated by the Bank for International Settlements and the Basel Committee, aims to establish an internationally unified framework for determining the capital adequacy ratio of banks to help banks offset their credit risks when providing off-balance-sheet services (including swaps and derivatives transactions) to customers.

Chinese enterprises and financial institutions have only started to set foot in financial swap business in recent years, and at present they are mainly limited to some simple forms such as interest rate swap and currency swap. The main reasons are: the risk management system of relevant institutions in China is not perfect, the professional level of relevant personnel is not high, and the state's foreign exchange control at the macro level is relatively strict. With China's entry into WTO, China's economy has gradually merged into the world economy, and financial derivatives widely used in the world will soon enter China, so financial swap will no longer be an armchair strategist. However, when using financial swaps in China, we must fully learn from the development experience of international financial swaps and follow the actual situation in China step by step; To fully realize that financial swap is a "double-edged sword", we must strictly regulate and strengthen internal control and external supervision. The price of the swap is mainly reflected in the interest rate and exchange rate that the swaps are willing to pay. In the international financial market, the main factors affecting the swap price are: ① the overall interest rate level, exchange rate level and its fluctuation range and changing trend during the swap period; (2) The amount and duration of the swap principal. (3) the capital status and asset-liability structure of both sides of the swap; (four) the credit status of the swap object; ⑤ Possibility of hedging swap contracts. Because there are many factors that affect the swap price, and different markets often have different income calculation methods in the pricing process, the pricing process is more complicated, especially the pricing of derivatives in swap transactions. Generally speaking, swap pricing mainly includes: first, according to the theoretical price of forward and option contracts, the specific pricing technology of forward and option contracts is an integral part of the swap pricing process. Using this method to price swap products mainly involves pricing skills such as forward contract pricing, option contract pricing, price parity reflecting the specific mathematical relationship between forward and option contract, and each link is very complicated. Secondly, the opportunity of arbitrage in the capital market through swap transactions creates opportunities by organizing these transactions at a theoretical price better than forward or option. The arbitrage price of any financial product in the capital market is better than the theoretical price of forward or option, which will make the prices of all other instruments adjust accordingly in a short time. Therefore, the internal relationship of various financial products and the arbitrage behavior caused by the price inconsistency between them determine the adjustment of swap pricing. Although theoretically, forward prices and financial arbitrage can be used to explain the pricing of financial swaps. But at present, financial arbitrage has become the main method of swap pricing, mainly because financial arbitrage can save costs for swap participants.

3. What is the basic principle of financial swap contract?

Principle of comparative advantage

Definition: The gap of labor productivity between the two countries is not equal in any product. For countries with absolute advantages, we should concentrate on producing goods with greater advantages, while countries with absolute disadvantages should concentrate on producing goods with less disadvantages (that is, "the two advantages are the most important and the two disadvantages are the least"), and then exchange goods with each other through international trade, which not only saves labor, but also benefits both sides.

4. What is a financial swap?

Financial swap refers to a series of transactions in which two or more participants directly or through intermediaries pay or cross each other's principal or interest. According to the different payment contents, there are two basic forms of financial swap: interest rate swap and currency swap. Interest rate swap interest rate swap is a financial swap that only exchanges interest, that is, both parties to the agreement calculate and exchange a set of interest flows for the same nominal principal amount according to different interest rate calculation indicators. Currency swap Currency swap is a financial swap that exchanges principal and usual interest, that is, both parties to the agreement exchange interest flows in different currencies within a given period, and at the end of the period, exchange the principal for calculating interest at the exchange rate agreed in the agreement.

5. Briefly describe the function of financial swap.

Financial system with settlement and payment functions

The financing function of the financial system

Detailed function of equity in financial system

Resource allocation function of financial system

Risk management function in financial system

The incentive function of the financial system,

Information function of financial system

6. What conditions do domestic financial institutions need to meet before they can join the interest rate swap?

As a new financial derivative, interest rate swap has developed rapidly in China. Especially with China's increasing participation in the operation of international financial capital, interest rate swap has become one of the effective means of debt preservation and capital appreciation among many enterprises and banks. From a macro perspective, the significance of interest rate swap to China's financial capital operation is as follows:

7. Conditions of financial swap

what can I say?

It has to be two parties first.

Then the borrowing costs of both parties are different.

The exchange of the two can gain income (there may be an intermediary to charge fees)

8. Financial swap of swap transactions

1. Interest rate swap: it means that both parties agree to exchange cash flows according to the same nominal principal in the same currency in a certain period in the future, in which one party's cash is calculated at a floating interest rate and the other party's cash flow is calculated at a fixed interest rate.

2. Currency swap: refers to the exchange of principal and fixed interest of one currency with equivalent principal and fixed interest of another currency.

3. Commodity exchange: It is a special type of financial transaction. In order to manage commodity price risks, both parties agree to exchange cash flows related to commodity prices. Including fixed price and floating price commodity price swap, commodity price and interest rate swap.

4. Other swaps: equity swaps, credit swaps, futures swaps and swap options.

[Editor] Financial swap has been praised by western financial circles as the most important financial innovation since 1980s. Since the establishment of 1982, it has developed rapidly. Many large multinational banks and investment banking institutions provide swap services. The largest swap markets are the international financial markets in London and new york. By the end of 1992, all outstanding debts in the swap market had reached 665 billion pounds.

9. Functions of financial swaps

The main functions of financial swaps are:

1. Financial swaps can be used to arbitrage between global markets, thus on the one hand reducing the financing cost of fund raisers or improving the asset returns of investors, and on the other hand promoting the integration of global financial markets.

2. Interest rate risk and exchange rate risk in asset-liability portfolio can be managed by using financial swaps.

3. Financial swap is an off-balance sheet business, which can avoid foreign exchange control, interest rate control and tax restrictions.

10. Who can specifically talk about financial swap transactions? It's not very written.

A simple case study of interest rate swap

I. Concept

Two different borrowers get loans from different or the same financial institutions. Under the mediation of the intermediary, the two sides agreed to pay each other the loan interest, so that both sides can get more favorable loans than the original conditions. In other words, there is a free lunch in the market.

Premises of interest rate swap: interest rate marketization, benchmark interest rate marketization and investment banking.

Second, concise case.

(1) Bank

B bank. Loan terms:

Bank loan interest rate:

Notes on enterprise credit rating, fixed interest rate and floating interest rate

AAA 7% 6% (market benchmark interest rate) The two interest rates have the same expected income for banks and the same expected financing cost for enterprises.

BBB 8% 6%+0.25%

CCC 9% 6%+0.5%

(2), borrowers, intermediaries

Company H, an AAA enterprise, borrowed 50 million yuan from Bank B ... with a fixed loan interest rate of 7%;

Company L, a CCC-level enterprise, borrowed 50 million yuan from Bank B ... The floating loan interest rate was 6.5%;

Intermediary: M Investment Bank, which collects 0. 1% of the loan amount from both parties respectively.

(3) Exchange process

Under the coordination of the intermediary, both parties agree that:

Company L undertakes the equity of Company H 1.75%, and then both parties exchange the obligation to pay interest, that is, pay interest to each other. Each interest payment is guaranteed by the intermediary company and transferred to the other party, and the intermediary agency charges a one-time service fee of 0. 1%.

(4) the result of the swap (assuming that the market interest rate has not changed)

1.h company pays floating interest rate and intermediary service fee: 7%-1.75%+0.1%= 5.25%+0.1%= 5.35%.

At first, if you borrow a loan with floating interest rate, you have to pay back 6%.

2.l Company pays the fixed interest rate and intermediary service fee: 6.5%+1.75%+0.1%= 8.25%+0.1%= 8.35%.

At first, if you borrow a loan with a fixed interest rate, you will pay 9%.

Both parties obtained a loan 0.65% lower than the original loan terms.

3. If the market interest rate has not changed,

Banks should get:

Interest charged from Company L (floating) = 6.5%

Interest charged to Company H (solid) = 7%

Total *** 13.5%

Now we get: 6.5%+5.25%+1.75 =13.5%.

Therefore, the interest income of banks is not small.

(5) The source of free cakes

The total free cake is 1.5%. Among them: H company 0.65%, L company 0.65% and intermediary company 0.2%.

It is brought about by the sale of credit by high credit rating companies.

Specific calculation: 1.5% = (9%-7%)-(6.5%-6%)

(6) Review the determination of the expenses borne by L Company.

After the cost of the intermediary company is determined, if the remaining free cakes are shared equally, how to determine the commitment of company L?

1.5% of the free cakes, 0.2% has been decided to give to the intermediary company. There is still 1.3% left, and both sides demand 0.65%.

From the point of view of H Company, it is required to change the fixed interest rate to floating interest rate, so as to obtain 0.65% income, that is, to obtain a loan with floating interest rate of 6%-0.65% = 5.35%. Then the share of company L to X should be:

7%—X+0. 1%=5.35%

x = 7%+0. 1%—5.35% = 1.75%

(7) In the real market, free cakes do exist. There are different opinions on the reasons for its existence, and there is no recognized reason so far.

Here is just a simple example to illustrate the basic principle of interest rate swap, which is much more complicated in actual trading and operation.