What is back-to-back hedging?
A back-to-back loan, also known as a parallel loan, is when two companies in different countries borrow offsetting amounts from one another in each other’s currency as a hedge against currency risk.
What is a back-to-back trade in finance?
Definition of term back-to-back (B2B) A back-to-back transaction consists of two legally separate but economically linked sale and purchase transactions which otherwise share the same trade details. Back-to-back transactions are very frequent in financial markets, and they are done for various reasons.
What is an offsetting swap?
A swap which exactly counters the interest rate or other market risk of a pre- existing swap but does not cancel the earlier swap.
What is swap bank?
A swap bank is an institution that acts as a broker between two counterparties who wish to enter into an interest rate or currency swap agreement and possibly remain anonymous. It brings together both sides of the deal and typically earns a slight premium from both counterparties for facilitating the swap.
What does back trading mean?
Backtesting allows a trader to simulate a trading strategy using historical data to generate results and analyze risk and profitability before risking any actual capital.
What is a swap agreement?
A swap is an agreement for a financial exchange in which one of the two parties promises to make, with an established frequency, a series of payments, in exchange for receiving another set of payments from the other party. These flows normally respond to interest payments based on the nominal amount of the swap.
What do you understand by swap?
: Swap refers to an exchange of one financial instrument for another between the parties concerned. This exchange takes place at a predetermined time, as specified in the contract. Description: Swaps are not exchange oriented and are traded over the counter, usually the dealing are oriented through banks.
What is the purpose of a swap?
The objective of a swap is to change one scheme of payments into another one of a different nature, which is more suitable to the needs or objectives of the parties, who could be retail clients, investors, or large companies.
When do you use back to back swaps?
A back-to-back swap is a common term to describe when a bank executes an interest rate swap with a borrower, and a second offsetting interest rate swap with a dealer counterparty. Why should I consider using back-to-back swaps at my bank?
Which is an example of a back to back interest rate swap?
Here are a few practical examples of back-to-back interest rate swaps: A commercial real estate investor who wants long-term fixed-rate financing is provided a floating-rate loan and a swap A company wants to lock-in the rate on an “evergreen” portion of its credit line and the bank offers a swap
Who is the largest back to back swap provider?
Since 2001, Chatham Financial has partnered with banks of all sizes to help launch, run, and grow successful customer back-to-back swap programs. As a result we are the largest and most experienced non-bank provider of back-to-back swap support to regional and community banks.
What is the definition of a currency swap?
A currency swap is a foreign exchange transaction that involves trading principal and interest in one currency for the same in another currency. A foreign currency swap is an agreement to exchange currency between two foreign parties, often employed to obtain loans at more favorable interest rates.
