A currency swap involves two principal amounts, one for each currency. There is an exchange of the principal amounts and the rate generally used to determine the two principal amounts is the then prevailing spot rate. Alternatively, the parties to the swap transaction can also enter into delayed/forward start swaps by agreeing to use the forward rate.
A currency swap is similar to a series of foreign exchange forward contracts, which are agreements to exchange two streams of cash flows in different currencies. Like all forward contracts, the currency swap exposes the user to foreign exchange risk. The swap leg the party agrees to pay is a liability in one currency and the swap leg the party agrees to receive is an asset in the other currency.
Consider a case of a corporate having a long term borrowing in USD. He can enter into following types of currency swaps to hedge the risks:
Types of currency swaps
IBL Registration Number NSE: INE231308847
MCX Stock Exchange Limited: INE261314434 for dealing in currency derivatives segment