“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:
In this question are we to assume it is a fixed-for-fixed currency swap? (i.e. neither side are paying a floating rate).
Also, does “fixed rate” in this context = swap fixed rate (SFR)?
In fixed-for-fixed, does Firm A always pay Firm B’s fixed rate? What is the logic behind this?