The foreign exchange swap is a combination of spot and forward transactions of the same amount of the currency delivered in two different dates and is ________.
A) Completed when both parties pay a deposit.
B) Adjusted at the midpoint of the contract.
C) No longer used in financial markets.
D) Executed in a single step.

Question

Quizplus · Accepted Answer

A foreign exchange swap is executed in a single step, where two parties exchange two currencies for a predetermined period and then exchange those currencies back at a predetermined exchange rate. It does not involve paying a deposit or adjusting the midpoint of the contract. While it may not be as common as other types of foreign exchange transactions, it is still used in financial markets.

The Foreign Exchange Swap Is a Combination of Spot and Forward