1. What do you mean by swap in foreign exchange?
The swap industry in foreign exchange is called swap, and the popular saying is overnight interest. . Refers to the overnight interest that should be borne by the leveraged part of funds used for foreign exchange speculation.
If the leverage of foreign exchange speculation is 1: 100, then only 1% of the funds are contributed by the trading company, and the remaining 99% are borrowed by liquidity providers. Therefore, if the transaction is not settled overnight, you need to pay (or charge) overnight interest.
The algorithm of overnight interest is: (annual interest rate of buying currency-annual interest rate of selling currency) /360 * the contract amount of the transaction.
If the interest is negative, it means that interest needs to be paid to the liquidity provider.
2. What does the position in foreign exchange mean?
Foreign exchange position refers to the balance of various foreign currency accounts held by foreign exchange banks, that is, the surplus and deficit of foreign exchange trading of foreign exchange banks. When foreign exchange banks buy more foreign exchange than they sell, when foreign exchange has long positions, it is also called overbought.
When the foreign exchange bought and sold by a foreign exchange bank is equal, the foreign exchange position is balanced, which is called leveling or leveling. When foreign exchange banks buy less foreign exchange than they sell, foreign exchange positions are short or short, which is also called oversold. The net balance of various foreign currencies of various maturities held by foreign exchange banks is called the total position.