A currency swap without the exchange of notional principal is most likely to be used in what situation?
A)a company issuing a bond
B)a company generating cash flows in a foreign currency
C)a company arranging a loan
D)a dealer trying to hedge a currency option
E)none of the above

Question

Quizplus · Accepted Answer

A currency swap without the exchange of notional principal is used when a company generates cash flows in a foreign currency and wants to hedge against exchange rate fluctuations. In this case, the parties exchange the currency of the cash flows, but not the principal amount. This helps the company to manage its foreign exchange risk.

A Currency Swap Without the Exchange of Notional Principal Is