Q:

Please write Advantages and Disadvantages of Swaps contract method . (150 words )

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Some apps could automatically update Heading 2 Tide ubde Emph. No Spacing Heading1 (2) (a) Critical evaluation of method (A)- Currency swaps Currency swaps are generally used to access a cheaper source of financing in the desired foreign currency without having to access foreign capital markets. A higher cost of debt for a firm in a foreign capital market is frequently higher than the cost cf debt that can be achieved by a local firm. The advantage of a currency swap is that there are no upfront costs. The disadvantage is that the firm is often exposed to the risk of default, not only on the principal amounts but also on any interest payments, if such payments are involved (Nzioka, 2017, p. 15). The simplest currency swap involves the exchange of only the notional amount with the other counterparty at a specified point in the future at a rate agreed now. This type of currency swap performs a function comparable to a forward or future contract. The cost of finding a counterparty and drafting of the terms with them, mostly done through a financial intermediary, often makes swaps more expensive than other derivatives international Finance forwards provide leverage and therefore with futures it is possible to hedge a big amount with a smaller outlay (Alvarado-Vargas, 2013, p. 11) (3) Conclusion