Assume that you are the Chase Manhattan Bank of the United States, and you have 1 million Swiss francs in your vault that you will need to use in 30 days.Moreover, you need 500,000 British pounds for the next 30 days.You arrange to loan your francs to Barclays Bank of London for 30 days in exchange for 500,000 pounds today and reverse the transaction at the end of 30 days.You have just arranged a

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The situation described is a currency swap, as it involves two parties exchanging currencies for a set period of time with the intention of reversing the transaction at a later date. A forward contract would involve an agreement to exchange currencies at a fixed rate in the future, while a futures contract is a standardized agreement traded on an exchange. A spot contract involves immediate exchange of currencies at the current market rate.

Assume That You Are the Chase Manhattan Bank of the United