Kaasuvaihto

Kaasuvaihto is a Finnish foreign exchange market and currency trading concept. It involves the exchange of currencies for a set price, where the cost of borrowing money is comprised of a base interest rate plus a markup. This markup is determined by a spread, which represents the profit made by the lender. The spread is expressed in basis points, with a basis point equal to one hundredth of one percent.

In the context of Kaasuvaihto, a lender quotes a price for the exchange, including the spread as a percentage of the base interest rate. For example, if the base interest rate is 5% and the spread is 2%, the total interest rate would be 7%. The difference between the two interest rates represents the lender's profit. Kaasuvaihto is often used in the context of short-term borrowing, with maturities ranging from a few days to several months.

Kaasuvaihto has seen significant development in recent years, particularly in the wake of the European sovereign debt crisis. Banks and other financial institutions have increased their engagement in short-term currency markets, often using borrowed foreign currency to fund assets denominated in a different currency. This has created new opportunities for lenders and borrowers alike, but also carries risks, including counterparty risk and changes in market conditions.