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"Essentially, these instruments call for money to change hands at some future date, with the amount to be determined by one or more reference items, such as interest rates, stock prices or currency values," - Warren Buffet on Derivatives

A form of Derivative contracts, Swaps is an agreement that involves the exchange of a stream of cash flows between two parties over a specified period of time based on underlying variables such as interest rates or foreign currency exchange rates. Whether you are a currency trader or a lender/borrower, this excellent hedging mechanism will act as a cover against unfavorable foreign exchange movements or changes in interest rates as the case maybe. A "plain vanilla" Interest Rate Swap that involves the exchange of fixed-rate interest payments for floating-rate interest payments are a great tool to managing interest rate risks. A "plain vanilla" currency swap involves exchanging principal and fixed interest payments on a loan in one currency for principal and fixed interest rate payments on a similar loan in another currency.

Why the need for Swaps?

  • A highly liquid financial risk hedging tool that takes care of your interest rate or currency risks
  • Comparative advantages on interest rates-if a company has access to a lower floating interest rate while another has access to a lower fixed interest rate, an interest rate swap will allow both firms to take advantage of the lower rates
  • Cheaper as no upfront premium involved while it reduces transactions costs
  • Longer-term as Swaps can run for years whereas futures and options are shorter-term
  • Allows companies a better match between their liabilities and revenues
  • Investors can profit from changes in interest rates and currency movements, paving way for speculation opportunities
 

Gain an edge in Swaps by choosing SIC Global

SIC Global is among the few brokerage houses which offer this cutting-edge financial instrument which is still finding its feet in India, but has become quite popular among financially developed markets such as the US.

  • SIC Global offers you a wide range of customised interest rate and currency swaps to hedge, speculate and manage your risk.
  • State-of-the-Art Support-gain an access to our specialist Swaps support team which will offer guidance in the form of risk analysis, implementing trade strategies and placing complex orders.
  • Exclusive research notes for Swaps to help you take informed decisions.