Tuesday, November 22, 2022

What is a Currency Swap?



Overview


  • A currency swap, also known as a cross-currency swap, involves the exchange of interest—and sometimes of principal—in one currency for the same in another currency. The interest payments are exchanged at fixed dates. Interest rates can be fixed or floating.
  • The two parties agree in advance whether or not they will exchange the principal amounts of the two currencies at the beginning of the transaction. Some currency swaps are for notional principal amounts, and the principal amounts are not actually exchanged between the parties. If there is an exchange of principal at the start of the deal, the exchange will be reversed when the contract reaches maturity.
  • It is common for the contract to specify that interest rate payments will be calculated quarterly and exchanged semi-annually.
  • Interest payments are normally not netted since they are in different currencies.
  • In the United States (and many other countries) the law does not require currency swaps to be shown on a company´s balance sheet.
  • Even though a Currency Swap is considered a foreign exchange transaction, it is not the same thing as a Foreign Exchange Swap (also known as forex swap or FX swap).

Fixed to fixed, floating to floating, or fixed to floating


There are three variations on the exchange of interest rates:

  • Fixed-rate to fixed rate
  • Fixed-rate to floating rate
  • Floating rate to floating rate (this type of swap is also known as a basis swap)

Examples


Company A is initially obligated to pay a fixed interest rate on a loan denominated in euros. By using a currency swap, Company A can swap that to a rate in United States dollars, and the exchange rate can be either fixed or floating.

Why?


Early on, currency swaps developed as a way of circumventing exchange controls imposed by governments. Today, they are utilized for other reasons and have become important financial instruments for banks, investors and multinational corporations.

A company can, for instance, use a currency swap to hedge a long-term investment and change their interest rate exposure. Another reason behind the existence of the currency swap is that a company which is based in one country and is doing business in another can use a currency swap to get more favourable interest rate terms and conditions for a loan denominated in the local currency than the rates offered by the local banks.




And even though they started out as a way to circumvent national law, governments today use currency swaps as well. One notable example is from October 2018, when the governments of India and Japan signed a bilateral currency swap agreement worth 75 billion USD to stabilise India's forex and capital markets.

Pricing


Traditionally, the pricing in currency swap contracts has been expressed as the London Interbank Offered Rate (LIBOR) plus or minus a certain number of points.

After a number of scandals, the validity of LIBOR as a benchmark has come into question, and the use of LIBOR in currency swaps is being phased out in favour of other benchmarks, especially the Secured Overnight Financing Rate (SOFR).

The US Federal Reserve and the UK financial authorities have announced that LIBOR will not be used in this context after June 30, 2023.

Implied exchange rate


The ratio between the two principal amounts creates an implied exchange rate.

Example: This swap involves 10 million euros and 11 million U.S. dollars. The implied EUR/USD exchange rate is, therefore, 1.10.

When the contract reaches its maturity, the two principal amounts will be exchanged. Because of this, there is an exchange rate risk involved in the currency swap, as the market exchange rate for EUR/USD might not be 1.10 on the maturity date.




Monday, November 21, 2022

5 Tips to Remember When Starting Up Your Own Investment

If you're thinking of starting up your own investment, you may come across some challenges along the way. Some of them are going to be difficulties that are inherent in starting any kind of business, but others may come as a surprise.

To help you out on your journey and make sure you don't get lost on the way, we've put together 5 tips you should remember when starting up an investment.

1. Plan on Your Financial Roadmap


Planning for your finances is key to making sure your investment runs as expected. Start by considering your financial goals, including how much you're going to need to invest and how long you expect it to take you to reach them. 

For those who want to invest in startups, you should identify your sources of financing in advance. You don't want to be in the situation of not being able to get out of the financial hole that you just dug yourself into.

2. Know the Business Inside and Out


The other key thing you should remember when starting your investment is to know the business inside out. Take your time and do thorough research to have a good grasp of everything you could possibly be investing in. Make sure you familiarize yourself with how the business works, potential challenges, and risks.

3. Be Willing to Learn


As an investor, it’s important to know the volatility of the investment. Even if you did your research at the beginning, you also need to be open to learning throughout the process. 



New opportunities, ideas, and changes can come up when you least expect them. So, if you are flexible and receptive to learning, you will beat the odds. Otherwise, if you don't learn along, the market conditions may prove you wrong and cause you losses.

4. Know Your Friends and Enemies


Finally, you should know that not everybody will want to see your business succeed. Of course, you will want a strong support system composed of trustable friends. 

But you should also be aware of false friends who will pretend to be on your side only to stab you in the back. Therefore, keep your guard up and beware of people who don't really want to see you succeed.

5. Identify Your Market Strategy


For any kind of business, marketing is an essential tool for success. Marketing makes your customers aware of your products and services and helps them make purchasing decisions. That said, you must identify the best marketing strategy to reach your target audience.

Final Thoughts


Starting your own investment is a milestone toward financial freedom. While owning an investment comes with certain risks, it’s important that you first learn the ropes. The above-mentioned tips will help you make sure that you don't get lost during your investment.

Sunday, November 20, 2022

Tips For Getting The Compensation You Deserve After A Wrongful Death

If you have a loved one die due to the negligence of others, it can be devastating to you and your family. This is especially true if your loved one provided most or all of the financial support for your family since you may now be left wondering what the future will hold.

To help ease your financial burden and give you and your family peace of mind in the years ahead, you need to gain compensation from a wrongful death lawsuit

To ensure this happens, here are some tips you should always remember.

Document Everything


When you have as many details as possible documented regarding your loved one's death, it becomes much easier to win compensation from a wrongful death lawsuit. 

This can include witness interviews, photographic evidence, testimony from expert witnesses, and more. Remember, the more evidence your attorney can present to a jury, the harder it will be for them to rule against you.

Don't Handle it On Your Own


After a loved one dies wrongfully, the worst thing you can do is try to handle what follows on your own. Unfortunately, an insurance company will have no problem at all denying you and your family the compensation you need and deserve. 

Instead of trying to negotiate a settlement on your own, always turn to attorneys like those at the Dennis Law Firm so that an experienced attorney can build a strong case on your behalf. 



Once this is done, your attorney can convince the insurance company it is in the best interests of everyone to settle the case out of court.

File the Lawsuit in Time


No matter the circumstances surrounding the death of your loved one, a court will have no choice but to toss your case aside should you fail to file your lawsuit within the time allotted by your state's statute of limitations. 

While this can vary among states, the general rule is you must file your lawsuit within two years following the death of your loved one, so always keep this in mind.

Be Patient


Finally, you will need to remain patient as your lawsuit progresses. Remember, your attorney is on your side but will need time to examine evidence and form a case that will be winnable. 

By staying patient, saying nothing about your case on social media, and using common sense along the way, you can gain compensation that is fair and reasonable.

By keeping these tips in mind and taking the advice of your attorney, you and your family can get justice for your deceased loved one by gaining substantial compensation for a death that never should have occurred.


Saturday, November 19, 2022

5 Things You Need To Know Before Buying Your Own Land To Mine


If you are like many people, the idea of striking it rich as a miner has a certain kind of allure. While you may have thoughts of hitting the mother lode and becoming rich overnight, it's usually not that easy.

Obviously, before you can even begin mining for gold or other valuable stuff that may be underground, you'll need to buy some land. Before you sign on the dotted line, here are five things you need to know.

Buying Land or Buying a Claim?


First, always be sure you are actually buying a piece of land rather than just purchasing an interest in a mining claim. If you own the land, anything you find is yours exclusively. Should you only buy a mining claim, you don't own the land, only the exclusive rights to mine for minerals on the land.

You May Need Permits


If you plan to mine on your land, keep in mind that you'll probably need permits from local, state, and federal agencies. Not only does this take time, but it can also prove expensive. Before you start digging, know exactly what permits will be required.

Buy the Right Equipment


Along with spending money on those permits, you will also need sophisticated equipment to make your mining operation efficient. A compact screening plant will be needed, especially if you are mining for gold. 



Depending on how big you decide to make your mining operation, heavy equipment, and even explosives may be needed, all of which will cost you more.

Maintenance Fees


When you buy land to use for mining, you may be required to pay annual maintenance fees if you establish a mining claim. Should you do so, you will need to keep your paperwork up-to-date annually. 

If you don't, even though you own the land, someone else may try to claim they have the right to file a mining claim on your land, which may lead to numerous legal headaches.

Beware of "Virgin" Land


Finally, if a piece of land you want to buy is being lauded as "virgin" land, don't fall for this ploy. Many times, sellers will try to convince potential buyers that "virgin" land has tons of gold, silver, and other stuff just below the surface. 

In reality, the land was not mined in the past because old-timers discovered there wasn't anything worth mining in the first place.

If you keep these five things in mind when buying your own land to mine, you can save time and money, get the equipment and permits needed, and spend most of your time searching for that one big strike.


Friday, November 18, 2022

What Type of Mortgage Is Best for You?

Buying a home can be an exciting time for a family. However, the complexity of the process can sometimes make getting a mortgage frustrating. For one, there are many different types of mortgages to choose from. To help clear up some of the confusion, below is an overview of some of the most popular mortgage types.

Conventional Mortgage


The first option you should consider is a conventional mortgage also sometimes referred to as a conventional loan. This is a mortgage that is not tied to backing from a government agency. 

Instead, these kinds of mortgages are provided through a private lender such as a bank, credit union, or mortgage company. An exception to this rule would be conventional mortgages that are guaranteed by the government-sponsored entities, Freddie Mac and Fannie Mae

If you have a good credit score, a conventional loan may be the best choice due to the control and choice you will have in the market.

Government Backed Mortgage


On the other hand, you may want to consider home loans that are indeed backed up by government agencies. This can be an excellent choice if you have poor credit or are in some kind of situation in which making the down payment would be difficult. 



Examples of government agencies that provide such loans include the FHA, VA, and USDA.

Fixed Rate Mortgage


Another popular choice is the fixed-rate mortgage. As the name suggests, this is a home loan in which the interest rate paid on the loan does not change during the loan's lifetime. 

The great thing about fixed-rate mortgages is there will be no mystery regarding what you will pay each month. The downside is, if economic conditions change during the lifetime of the loan, you may end up paying more in interest than you would have otherwise.

Adjustable Rate Mortgage


Alternatively, adjustable rate mortgages, sometimes shortened to ARM, have an interest rate that varies based on changes to an index or benchmark. 

In most cases, this usually results in paying less in interest rates in the short term and higher interest rates in the long term. If the term of the home loans are shorter, the borrower may end up saving money. 

Thankfully, there is typically a cap on how much the interest rate can inflate over the year.

Overall, don't rush into choosing a mortgage. If you take your time, you may be able to find a loan that is much better for your situation. 

However, if you rush into the process, you may end up paying more in interest and have to deal with other issues you wouldn't have if you had performed more research.


Thursday, November 17, 2022

Have Valuables to Keep Secure? Here Are 5 Home Safe Options

Safes are a great way to keep your valuables tucked away, but did you know there are several different types to choose from? Overall, a safe should be a secure box that you must open with a special key or code, but you may have more use for one type of safe than another. Here are the ones you can choose from.

Fire-Resistant Safes


Fire-resistant safes resist flames enough to keep your valuables safe. Although they would be damaged in a fire, the safe and its contents will not burn completely unless you experience a fire burning at over 1,800 degrees Fahrenheit. This allows them to keep your valuables, money, or important documents safe and intact.

Diversion Safes


These safes are unique in that they look like a regular pieces of furniture or home decor, but they have a hidden compartment that is actually a safe. 



They act as a decoy to make anyone who may break into your home think there are no valuables around. People often place diversion safes in a bookcase that has a special lever on the side. 

The safe can be accessed using a unique code and opens to reveal any special belongings you want to hide from burglars.

Under-Bed Safes


Like diversion safes, under-bed safes can also be fairly well hidden. You typically need to lift up your bed frame to access them as they have a special lock underneath it.

Gun Safes


Gun safes not only offer protection from a burglar stealing your belongings, they also stop your kids from accessing your firearms. 

Liberty safes have thick padding to help prevent unwanted access to your guns. They can typically be placed either horizontally or vertically, depending on the size of your guns and the space you have to store them.

Burglar-Resistant Safes


These safes are built to be incredibly sturdy to prevent burglars from breaking into them. They cannot be forced open with a hammer, crowbar, or even an electric drill. 

While these safes can keep burglars out of your valuables, they are not fireproof, so you might not want to keep any important documents that cannot be re-created in them.

Safes are a great way to keep your belongings secure in the event of a robbery or a fire. There are a number of different safes to choose from, so be sure to weigh your options and pick the one that is best for you.




Join 1000's of People Following 50 Plus Finance
Real Time Web Analytics