Abstract
The objective of this article is to verify, based on balanced portfolio theory, the impact of the offer by the Brazilian Central Bank of exchange rate swaps and reverse swaps on the attributes of the term structure of the effective interest rate on dollar borrowings (the dollar coupon curve). For this purpose, we use linear regression of principal components. As a complementary analysis, we also study the volatility of the dollar coupon curve and the spot exchange rate. The results indicate that the reverse foreign exchange swaps do not generate an impact on the general level of the coupon curve, while the regular swaps generate significant changes.
Highlights
INTRODUCTION he Central Bank ofBrazil and the Federal Reserve announce the “Testablishment of a swap line of American dollars for reais in the amount of US$ 30 billion, valid until April 30, 2009
The results show that one cannot say that the actions of the Central Bank made at the lead purchased tip of the exchange variation, i.e., offers of reverse currency swaps have generated impact in the TSCC on your overall level
5 CONCLUSION The purpose of this work is to verify, based on the theory of portfolio balance theory, what is the impact of the offers by the Central Bank of Brazil of the currency swaps and reverse currency swaps in the attributes referring to the term structure of the currency coupon
Summary
Brazil and the Federal Reserve announce the “Testablishment of a swap line of American dollars for reais in the amount of US$ 30 billion, valid until April 30, 2009 This line does not imply conditionalities of economic policy and will be used to augment the funds available for the liquidity provision operations in dollars by the BC.”. This news, released on October 29, 2008, through the Central Bank of Brazil (Bacen) site, reflects the concern with the currency exchange after the worsening of the financial crisis unleashed in the United States in mid-September of 2008. Among them those of a financial origin stand out, like the arbitrage of the investors among the countries' interest rates, the interventions of the monetary authorities and the credit risk associated to each country, the so-called country risk
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
