Define comparative advantage related to currency swap market, Financial Management

How does the theory of comparative advantage relate to the currency swap market?

Answer:  Name recognition is very important in the international bond market. With no it, even a creditworthy corporation will find out itself paying a higher interest rate for foreign denominated funds as compared to a local borrower of equivalent creditworthiness.  Accordingly, two firms of equivalent creditworthiness can every exploit their, respective, name recognition by borrowing in their local capital market at a favorable rate and after that re-lending at similar rate to the other.

Posted Date: 5/9/2013 6:04:38 AM | Location : United States

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