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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