A
AlexLky
Member
Hi,
Please can someone explain what the following means, in layman's terms (Chapter 23 - Page 3, talking about disadvantages of currency swaps):
- Mismatching real liabilities by eliminating purchasing power parity protection against unexpected inflation differentials.
I interpret it as any adverse inflation rate movements on the underlying liabilities can no longer be offset by any favourable currency movements, as exchange rate movements have been hedged against. I feel like I am not exactly there with this so any explanation will be helpful.
Thanks
Please can someone explain what the following means, in layman's terms (Chapter 23 - Page 3, talking about disadvantages of currency swaps):
- Mismatching real liabilities by eliminating purchasing power parity protection against unexpected inflation differentials.
I interpret it as any adverse inflation rate movements on the underlying liabilities can no longer be offset by any favourable currency movements, as exchange rate movements have been hedged against. I feel like I am not exactly there with this so any explanation will be helpful.
Thanks