Interest Rate and Foreign Currency Swaps Pertemuan 13 Matakuliah: Keuangan Internasional Tahun: 2009

Bina Nusantara University 3 Soal 1 Exercise (Question 3) Banks quote interest rate and currency swaps using the 6 month LIBOR as a basis for both transactions. How can a Bank make money if does not speculate on movements in either interest rates or exchange rates ?

Bina Nusantara University Banks quote the fixed side of the swap with a bid-ask spread. When they pay the fixed-rate side of the swap, they do so at a lower rate than when they receive the fixed-rate side of the swap from their counterparty. Thus, if they are able to balance the transactions, being both a payer of the fixed rate and a receiver of the fixed rate for the same gross amounts, they earn the bid-ask spread. This can be a substantial amount of money. Jawaban Soal 1

Bina Nusantara University 5 Soal 2 Exercise (Problem 4) The swap desk at UBS is quoting the following rates on 5 year swaps versus 6 month dollar LIBOR : US dollars : 8.75 % bid and 8.85 % offered Swiss Francs : 5.25 % bid and 5.35 % offered You would like to swap out of Swiss Franc debt with a principal of CHF 25,000,000 and into fixed rate dollar debt. At what rates will UBS handle the transaction ? If the current exchange rate is CHF 1.3/$ what would the cash flows be ?

Bina Nusantara University 6 Jawaban Soal 2 Because you want to swap out of Swiss franc debt, you want UBS to pay you Swiss francs and you want to pay UBS dollars. UBS pays Swiss francs at 5.25%, and it receives dollars at 8.85%. When you receive Swiss francs, you pay 6-month dollar LIBOR on the equivalent dollar amount, and when you pay dollars, you receive 6- month dollar LIBOR on that same dollar amount. Thus, the floating rate dollar cash flows cancel, and you would just make the fixed rate dollar payment and would receive the fixed rate Swiss franc payment. In the beginning of the currency swap, you would give the Swiss franc principal of CHF25,000,000 to UBS who would give you CHF 25,000,000 = $ 19,230,769 CHF 1,3/$ You would then make semi-annual dollar payments of % $19,230,769 = $850,962 You would receive semi-annual Swiss franc payments of % CHF25,000,000 = CHF656,250 At the end of 5 years, you would also pay the principal of $19,230,769 and you would receive the CHF25,000,000.

Bina Nusantara University 7 Soal 3 Home Work Soal 3, merupakan tugas perorangan yaitu setiap mahasiswa diwajibkan untuk menjawab pertanyaan (Question dan Problem) yang ada disetiap akhir bagian masing-masing chapter. Tugas ini dikumpulkan sebelum perkuliahan pertemuan berikutnya dimulai. Mahasiswa menjawab Question 9, 11 dan Problem 8 yang ada di halaman