Question

by using practical examples what are the roles and uses of a financial intermediaries with emphasis on currency swap

Answer 1

Currency swaps also known as cross-currency swaps which involve the exchange of a set of payments on one currency for a set of payments in another currency. The financial intermediaries facilitate the parties which want to enter into currency swaps to hedge their currency exposures. For example, a USA based company planning to invest in India so needs Indian Rupees and another company in India wants to open its business unit in USA so it requires US dollar. Therefore through a financial intermediary, they can enter into currency swap agreement and avoid other sources to get foreign currency at higher cost. So the roles and uses of financial intermediaries in currency swap are working as broker/dealer, giving expert advice and reducing credit risk.