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Parallel Loan |
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Parallel loan A process whereby two companies in different countries borrow each other's currency for a specific period of time, and repay the other's currency at an agreed maturity for the purpose of reducing foreign exchange risk. Also referred to as back-to-back loans. Back-to-Back Loan A situation in which two companies in different countries borrow an equivalent amount from each other in their respective currencies. That is, there is no net capital output because the companies are borrowing the same amount, only in different currencies. The companies repay these loans in an agreed-upon period of time. This used to be a common way to hedge against currency fluctuations, though currency swaps have largely replaced them. Want to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit the webmaster's page for free fun content. |
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