is an over-the-counter short term
interest rate derivative instrument.
In emerging money markets, forex swaps
are usually the first derivative
instrument to be traded, ahead of
forward rate agreements.
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Converts to a future value - F - given a present single payment or value - P - today?
F = P [(1 + i)n]
Converts to a present value - P - given a future payment or value - F?
P = F [(1 + i)-n]
Converts to a future value - F - given a uniform amount - A - per interest ??????
F = A [( (1 + i)n -1 ) / i ]
Converts to a uniform amount - A - per interest period a given specific future value - ?
A = F [i/((1 + i)n - 1)]
Converts a uniform amount - A - per interest period to a present value - ?
P = A [((1 + i)n - 1) / ( i (1+i)n )]
Converts a present value - P - to a uniform amount - A - per interest ??????
A = P [(i (1 + i)n) / ((1+i)n - 1)]
Some notation
• i = the interest rate per period
• n = the number of compounding periods
• P = a present (earlier) sum of money
• F = a future (later) sum of money
• A = a uniform series of payments
• G = a linearly increasing series of payments