Currency Swap

The speaker provides a detailed overview of a currency swap.  A currency swap is created when two counterparties, who have issued two securities denominated in different currencies, exchange the principal at the outset of the swap.  This exchange is primarily governed by the exchange rate.  At some predefined interval afterwards, the counterparties will exchange interest payments based on the currency interest rate.  At the end of the swap agreement, the counterparties will return the principal back to the other counterparty.