3.4.1 Maintain Product Combinations

A swap deal is, in effect, a combination of two foreign exchange contracts. These contracts could be:

• Spot - Forward OR
• Forward - Forward contracts

A swap deal will, therefore, involve two distinct products that you have created. The first leg of the deal will involve a particular product. And the second leg of the contract will involve a different product.

For example, You have defined a product for spot deals for buying USD with INR called Buy USD. You have created another product for purchasing INR with USD called Buy INR.

You enter a swap deal in which in the first leg you buy USD and sell INR, and in the next leg, you buy INR and sell USD.

If you do not maintain a product combination, you will enter a different contract for each leg of the swap deal. For the first leg of the swap, you will enter a spot deal to buy USD and sell INR. The product involved would be Buy USD. In the second leg of the swap, you will enter a spot deal to buy INR and sell USD. The second leg of the exchange would involve Buy INR.