Question

________ are transacted between international businesses and their banks, between banks, and between governments when it is desirable to move out of one currency into another for a limited period without incurring foreign exchange risk.

Answer 1

Answer: Swaps

Explanation:

A foreign exchange swap is a written agreement between two parties with different currencies to exchange such currencies at a specific period of time. In a swap deal, one party to the agreement gives out currency to the other party while also collecting collecting currency from such party. The written agreement usually contains such details like the interest on the amount of exchange, as well as the loan value of one currency against the other.

Answer 2

Answer: Swap

Explanation:

Swap is a process where one party changes cash flows or values for an asset or another.

An example is company paying a variable rate of interest may swap its interest payments with another company that will then pay the first company a fixed rate. Swaps can be categorized in the following types interest rate swaps, basis swaps, currency swaps, inflation swaps, credit default swaps, commodity swaps and equity swaps.