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Currency swap vs forward

Hello, 

There is something i can’t understand in this chapter of derivatives about currency swap… please find below a simple example.

A company will receive 4mCAD every 6 months for the next 2 years (4 payments). 
The current exchange rate is USD/CAD 0.78
swap rate USD : 4%
swap rate CAD : 3% 

The company enters a currency swap in which it will receive 2 340 000 USD (pay 4 000 000 CAD) each semester, computation as below : 
4 000 000 / 0.04 = 200 000 000 CAD converted spot in 156 000 000 USD. 
156 000 000 * 0.03 * 180/360 = 2 340 000 USD 

The company convert its CAD in USD at a 0.58 USD exchange rate.

However, working as a FX Sale in a bank, if a client come to me saying that he will receive 4 000 000 CAD each semester, i will propose him a simple forward contract with an exchange rate computed as 0.78 * USA rate / CAD Rate = 0.7850. 

Thus my client will pay 4 000 000 CAD and will receive around 3 140 000 USD each semester, which is a much better deal than the currency swap…

Why i dont understand ? 

Thank you very much
 

 

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I have not found the example in cfai 

please note that there are 3 alternative fx products discussed. It prolly depends on the requirement. This client might be indifferent between 2) and 3) from the example

1) currency swaps - exchange notionals - longer commitment than just 2 years; stable exchange rate through out the contract 

2) fx-swap - relatively short term - no exchange of notionals- nothing but rolling forwards of spot and forward legs for the terms say 2 years (May not require mtm?) - you may match or mismatch based on requirements 

3) currency forwards - mtm required - u seem to know the drill

please someone ? it makes no sense to me

You must keep in mind that

1) Using the currency forward, you would have to roll the position each quarter (since there are no such thing as a forward contract with coupon payments), so you don`t lock in the interest rates for 2y as you do with setting up a swap

2) Coupon payments aside, if swap rates reflect the implied carry on the currency forward, both instruments should reflect the same economic result. Otherwise, one could buy one and sell the other, capturing the premium without market risk