Blue Chip Swap

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DEFINITION of 'Blue Chip Swap'

When a domestic investor purchases a foreign asset and then transfers that asset to a domestic bank branch located offshore. Then, the funds from the foreign asset are transfered into a bank account in the domestic country. The domestic investor usually has a partner transferring assets to the foreign branch on his or her behalf.

BREAKING DOWN 'Blue Chip Swap'

Blue chip swaps, which were performed in Brazil during the late '90s, were a result of a law that reduced the amount of capital inflow into the country. The law prohibited direct foreign investments in the country's derivative markets, but blue chip swaps allowed this type of investment to continue.

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RELATED FAQS
  1. What are the main risks associated with trading derivatives?

    The primary risks associated with trading derivatives are market, counterparty, liquidity and interconnection risks. Derivatives ... Read Full Answer >>
  2. What are the drawbacks of a small investor buying blue-chip stocks?

    Blue-chip stocks are generally safer for investors. However, their drawbacks for small investors include moderate growth ... Read Full Answer >>
  3. Should you calculate Value at Risk (VaR) for counterparty credit risk?

    Value at risk (VaR) calculations may be helpful for risk management when trading credit default swaps and other derivatives ... Read Full Answer >>
  4. For what financial instruments is a modified duration relevant?

    The modified duration is a formula used to calculate the percent change in the price of a financial instrument when there ... Read Full Answer >>
  5. What is the difference between derivatives and swaps?

    Derivatives are securities with prices dependent on one or multiple underlying assets. Common derivatives include forward ... Read Full Answer >>
  6. Why is tenor important on credit default swaps?

    Tenor – the amount of time left on a debt security's maturity – is important in a credit default swap because it coordinates ... Read Full Answer >>

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