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Non Deliverable Swap - NDS
What does it mean?
Similar to a non deliverable forward, the only difference being that settlement for both parties is done through a major currency.
In Other Words...
For example, if two companies enter into a currency swap for $1 million. The one company might be located in a country with an undesirable currency. This means that a payment due to the company in the undesirable currency is converted into the major currency at the prevailing spot rate on each interest payment date and at maturity.
Non deliverable swaps have allowed emerging markets with minor currencies to hedge against currency risk.
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Related Terms
Currency Swap | Maturity Date | Non Deliverable Forward | Swap
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