国际财务管理学与财务知识分析(英文版)(35页PPT).pptx

INTERNATIONALFINANCIALMANAGEMENTEUN/RESNICKSecond Edition10Chapter TenCurrency&Interest Rate SwapsChapter Objective:This chapter discusses currency and interest rate swaps,which are relatively new instruments for hedging long-term interest rate risk and foreign exchange risk.Chapter OutlinelTypes of SwapslSize of the Swap MarketlThe Swap BanklInterest Rate SwapslCurrency Swaps2Chapter Outline(continued)lSwap Market QuotationslVariations of Basic Currency and Interest Rate SwapslRisks of Interest Rate and Currency SwapslSwap Market EfficiencylConcluding Points About Swaps3DefinitionslIn a swap,two counterparties agree to a contractual arrangement wherein they agree to exchange cash flows at periodic intervals.lThere are two types of interest rate swaps:nSingle currency interest rate swapu“Plain vanilla”fixed-for-floating swaps are often just called interest rate swaps.nCross-Currency interest rate swapuThis is often called a currency swap;fixed for fixed rate debt service in two(or more)currencies.4Size of the Swap MarketlIn 1995 the notational principal of:interest rate swaps was$12,810,736,000,000.Currency swaps$1,197,395,000,000lThe most popular currencies are:nU.S.$(34%)n(23%)nDM(11%)nFF(10%)n(6%)5The Swap BanklA swap bank is a generic term to describe a financial institution that facilitates swaps between counterparties.lThe swap bank can serve as either a broker or a dealer.nAs a broker,the swap bank matches counterparties but does not assume any of the risks of the swap.nAs a dealer,the swap bank stands ready to accept either side of a currency swap,and then later lay off their risk,or match it with a counterparty.6An Example of an Interest Rate SwaplConsider this example of a“plain vanilla”interest rate swap.lBank A is a AAA-rated international bank located in the U.K.who wishes to raise$10,000,000 to finance floating-rate Eurodollar loans.nBank A is considering issuing 5-year fixed-rate Eurodollar bonds at 10 percent.nIt would make more sense to for the bank to issue floating-rate notes at LIBOR to finance floating-rate Eurodollar loans.7An Example of an Interest Rate SwaplFirm B is a BBB-rated U.S.company.It needs$10,000,000 to finance an investment with a five-year economic life.nFirm B is considering issuing 5-year fixed-rate Eurodollar bonds at 11.75 percent.nAlternatively,firm B can raise the money by issuing 5-year FRNs at LIBOR+percent.nFirm B would prefer to borrow at a fixed rate.8An Example of an Interest Rate SwapThe borrowing opportunities of the two firms are shown in the following table:910 3/8%LIBOR 1/8%An Example of an Interest Rate SwapBank ASwap BankThe swap bank makes this offer to Bank A:You pay LIBOR 1/8%per year on$10 million for 5 years and we will pay you 10 3/8%on$10 million for 5 years 1010 3/8%LIBOR 1/8%An Example of an Interest Rate SwapBank ASwap BankHeres whats in it for Bank A:They can borrow externally at 10%fixed and have a net borrowing position of-10 3/8+10+(LIBOR 1/8)=LIBOR%which is%better than they can borrow floating without a swap.10%of$10,000,000=$50,000.Thats quite a cost savings per year for 5 years.11LIBOR%10%An Example of an Interest Rate SwapSwap BankCompany BThe swap bank makes this offer to company B:You pay us 10%per year on$10 million for 5 years and we will pay you LIBOR%per year on$10 million for 5 years.12LIBOR%10%An Example of an Interest Rate SwapSwap BankCompany BThey can borrow externally at LIBOR+%and have a net borrowing position of 10 +(LIBOR+)-(LIBOR-)=11.25%which is%better than they can borrow floating without a swap.LIBOR+%Heres whats in it for B:%of$10,000,000=$50,000 thats quite a cost savings per year for 5 years.13LIBOR+%10 3/8%LIBOR 1/8%LIBOR%10%B saves%An Example of an Interest Rate SwapBank ASwap BankCompany BA saves%The swap bank makes money too.10%of$10 million=$25,000 per year for 5 years.LIBOR 1/8 LIBOR =1/8 10 -10 3/8=1/8 14LIBOR+%10 3/8%LIBOR 1/8%LIBOR%10%B saves%An Example of an Interest Rate SwapBank ASwap BankCompany BA saves%The swap bank makes%10%Note that the total savings +=1.25%=QSD15The QSDlThe Quality Spread Differential represents the potential gains from the swap that can be shared between the counterparties and the swap bank.lThere is no reason to presume that the gains will be shared equally.lIn the above example,company B is less credit-worthy than bank A,so they probably would have gotten less of the QSD,in order to compensate the swap bank for the default risk.16An Example of a Currency SwaplSuppose a U.S.MNC wants to finance a 10,000,000 expansion of a British plant.lThey could borrow dollars in the U.S.where they are well known and exchange for dollars for pounds.nThis will give them exchange rate risk:financing a sterling project with dollars.lThey could borrow pounds in the international bond market,but pay a lot since they are not as well known abroad.17An Example of a Currency SwaplIf they can find a British MNC with a mirror-image financing need they may both benefit from a swap.lIf the exchange rate is S0($/)=$1.60/,the U.S.firm needs to find a British firm wanting to finance dollar borrowing in the amount of$16,000,000.18An Example of a Currency SwapConsider two firms A and B:firm A is a U.S.based multinational and firm B is a U.K.based multinational.Both firms wish to finance a project in each others country of the same size.Their borrowing opportunities are given in the table below.19An Example of a Currency SwapCompany ASwap Bank$8%12%$8%11%12%$9.4%Company B20An Example of a Currency SwapCompany ASwap Bank$8%12%$8%11%12%$9.4%Company BAs net position is to borrow at 11%A saves.6%21An Example of a Currency SwapCompany ASwap Bank$8%12%$8%11%12%$9.4%Company BBs net position is to borrow at$9.4%B saves$.6%22An Example of a Currency SwapCompany ASwap Bank$8%12%$8%11%12%$9.4%Company BThe swap bank makes money too:At S0($/)=$1.60/,that is a gain of$124,000 per year for 5 years.The swap bank faces exchange rate risk,but maybe they can lay it off in another swap.1.4%of$16 million financed with 1%of 10 million per year for 5 years.23A is the more credit-worthy of the two firms.Comparative Advantage as the Basis for SwapsA has a comparative advantage in borrowing in dollars.B has a comparative advantage in borrowing in pounds.A pays 2%less to borrow in dollars than BA pays.4%less to borrow in pounds than B:24B has a comparative advantage in borrowing in.Comparative Advantage as the Basis for SwapsB pays 2%more to borrow in dollars than AB pays only.4%more to borrow in pounds than A:25A has a comparative advantage in borrowing in dollars.B has a comparative advantage in borrowing in pounds.If they borrow according to their comparative advantage and then swap,there will be gains for both parties.Comparative Advantage as the Basis for Swaps26Swap Market QuotationslSwap banks will tailor the terms of interest rate and currency swaps to customers needslThey also make a market in“plain vanilla”swaps and provide quotes for these.Since the swap banks are dealers for these swaps,there is a bid-ask spread.lFor example,6.60 6.85 means the swap bank will pay fixed-rate DM payments at 6.60%against receiving dollar LIBOR or it will receive fixed-rate DM payments at 6.85%against receiving dollar LIBOR.27Variations of Basic Currency and Interest Rate SwapslCurrency Swapsnfixed for fixed nfixed for floatingnfloating for floatingnamortizinglInterest Rate Swaps nzero-for floatingnfloating for floatinglFor a swap to be possible,a QSD must exist.Beyond that,creativity is the only limit.28Risks of Interest Rate and Currency SwapslInterest Rate RisknInterest rates might move against the swap bank after it has only gotten half of a swap on the books,or if it has an unhedged position.lBasis RisknIf the floating rates of the two counterparties are not pegged to the same index.lExchange rate RisknIn the example of a currency swap given earlier,the swap bank would be worse off if the pound appreciated.29Risks of Interest Rate and Currency Swaps(continued)lCredit RisknThis is the major risk faced by a swap dealerthe risk that a counter party will default on its end of the swap.lMismatch RisknIts hard to find a counterparty that wants to borrow the right amount of money for the right amount of time.lSovereign RisknThe risk that a country will impose exchange rate restrictions that will interfere with performance on the swap.30Pricing a SwaplA swap is a derivative security so it can be priced in terms of the underlying assets:lHow to:nPlain vanilla fixed for floating swap gets valued just like a bond.nCurrency swap gets valued just like a nest of currency futures.31Swap Market EfficiencylSwaps offer market completeness and that has accounted for their existence and growth.lSwaps assist in tailoring financing to the type desired by a particular borrower.Since not all types of debt instruments are available to all types of borrowers,both counterparties can benefit(as well as the swap dealer)through financing that is more suitable for their asset maturity structures.32Concluding RemarkslThe growth of the swap market has been astounding.lSwaps are off-the-books transactions.lSwaps have become an important source of revenue and risk for banks33End Chapter Ten341、有时候读书是一种巧妙地避开思考的方法。11月-2211月-22Monday,November 7,20222、阅读一切好书如同和过去最杰出的人谈话。20:23:2620:23:2620:2311/7/2022 8:23:26 PM3、越是没有本领的就越加自命不凡。11月-2220:23:2620:23Nov-2207-Nov-224、越是无能的人，越喜欢挑剔别人的错儿。20:23:2620:23:2620:23Monday,November 7,20225、知人者智，自知者明。胜人者有力，自胜者强。11月-2211月-2220:23:2620:23:26November 7,20226、意志坚强的人能把世界放在手中像泥块一样任意揉捏。07十一月20228:23:26下午20:23:2611月-227、最具挑战性的挑战莫过于提升自我。十一月228:23下午11月-2220:23November 7,20228、业余生活要有意义，不要越轨。2022/11/720:23:2620:23:2607 November 20229、一个人即使已登上顶峰，也仍要自强不息。8:23:26下午8:23下午20:23:2611月-2210、你要做多大的事情，就该承受多大的压力。11/7/2022 8:23:26 PM20:23:2607-11月-2211、自己要先看得起自己，别人才会看得起你。11/7/2022 8:23 PM11/7/2022 8:23 PM11月-2211月-2212、这一秒不放弃，下一秒就会有希望。07-Nov-2207 November 202211月-2213、无论才能知识多么卓著，如果缺乏热情，则无异纸上画饼充饥，无补于事。Monday,November 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