Quanto Swap

What does it mean?
A dual swap combining both a currency and interest rate transaction.

In Other Words...
The purpose behind a Quanto Swap is to minimize foreign exchange risk. This is done by fixing the exchange rate and interest rate at the same time.

This is also referred to as a differential swap.

Related Links
Financial Derivatives and Foreign Currency Risk - Detailed examples of swaps, including quanto swaps

Related Terms
Libor | Swap

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