Quanto swap

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Quanto swap

Quanto Swap

A swap of any kind in which the assets swapped are denominated in two different currencies, but are settled in the same currency. For example, two investors may swap interest rates, one calculated in British pounds and one calculated in U.S. dollars, and settle in dollars. The exchange rate at which the contract is settled is specified at the beginning of the contract to protect the counterparties from foreign exchange risk.

References in periodicals archive ?

In both diff swaps and quanto swaps, the dealer commits to paying a floating foreign rate on a fixed U.S.

While this rule would prohibit direct foreign capital market holdings, the managers of these investments could gain exposure to foreign debt or equity markets through correlation products such as diff swaps or quanto swaps.

In addition to diff swaps and quanto swaps, several new types of correlation products have been developed in recent years.