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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.

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Financial Management, Finance

Category:- Financial Management
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