How do we know when it is a Fixed-for-fixed Currency Swap?

“A U.S. firm (U.S.) and a foreign firm (F) engage in a 3-year, annual pay currency swap; The USD fixed rate at initiation was 5% while FC fixed rate was 4%.”

Two questions here:

  1. In this question are we to assume it is a fixed-for-fixed currency swap? (i.e. neither side are paying a floating rate).

  2. Also, does “fixed rate” in this context = swap fixed rate (SFR)?

  3. In fixed-for-fixed, does Firm A always pay Firm B’s fixed rate? What is the logic behind this?

I don’t see how you can assume otherwise. Rest assured, however, that on the exam they’ll make it quite clear that you’re paying and receiving a fixed rate.


I’m not sure what you mean by “Firm B’s fixed rate”.

A USD payer pays the USD fixed rate, an EUR payer pays the EUR fixed rate, an ANG payer pays the ANG fixed rate, a CYN payer pays the CYN fixed rate, and so on.