Currency Swap is an agreement according to which the parties agree to buy or sell a corresponding amount of one currency for another currency according to a certain price on a certain day while at an established date in the future as well as to buy back at an established price the same sum of currency exchanging it for the same currency. This transaction can be treated as borrowing one currency, mortgaging another currency, and paying or receiving the difference of the interests of these currencies for the period agreed in the transaction. A swap allows an enterprise to effectively control its cash flows without incurring any currency exchange risk.
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