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0 2. 7 3. 3 3. 5 Source: "The International OTC Derivatives Market at end-December 2004", BIS, , "OTC Derivatives Market Activity in the Second Half of 2006", BIS, Major Swap Participant [modify] A Major Swap Participant (MSP, or often Swap Bank) is a generic term to explain a banks that assists in swaps between counterparties.

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A swap bank can be an international industrial bank, a financial investment bank, a merchant bank, or an independent operator. A swap bank works as either a swap broker or swap dealership. As Click Here For Additional Info , the swap bank matches counterparties however does not assume any risk of the swap. The swap broker receives a commission for this service.

As a market maker, a swap bank is willing to accept either side of a currency swap, and after that later on-sell it, or match it with a counterparty. In this capability, the swap bank assumes a position in the swap and for that reason assumes some dangers. The dealer capacity is undoubtedly more dangerous, and the swap bank would get a portion of the cash streams travelled through it to compensate it for bearing this threat.

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These reasons seem simple and challenging to argue with, especially to the level that name acknowledgment is really important in raising funds in the worldwide bond market. Companies utilizing currency swaps have statistically higher levels of long-lasting foreign-denominated debt than companies that use no currency derivatives. Conversely, the primary users of currency swaps are non-financial, global firms with long-term foreign-currency funding needs.

Financing foreign-currency debt utilizing domestic currency and a currency swap is for that reason remarkable to financing straight with foreign-currency financial obligation. The 2 main factors for switching interest rates are to much better match maturities of assets and liabilities and/or to get an expense savings via the quality spread differential (QSD). Empirical evidence suggests that the spread between AAA-rated industrial paper (drifting) and A-rated commercial is somewhat less than the spread in between AAA-rated five-year obligation (fixed) and an A-rated commitment of the exact same tenor.