A blue chip swap is a little like solving a jig saw puzzle, or even a shell game where you guess which cup the penny is under. Here’s how it works:
A. Joe Blue of the USA purchases a foreign stock, bond, or currency.
B. With the help of a friend, he then transfers the asset to a Citibank branch in London.
C. Next, he transfers the foreign asset to a U.S. branch of Citibank, and hopefully reaps a profit.
Why go to all this trouble? Joe most likely got a reduced price on the stock, for example, and he also took advantage of depreciated exchange rates. Others use blue chip swaps to legally move money in and out of countries such as Brazil and Argentina.
Blue chip swaps became very popular in the late 1980s and 90s, when they were experiencing hyperinflation, and established capital control laws. When Argentina got rid of their fixed exchange rate in early 2000, they tied their peso to the U.S. dollar. The exchange rate plummeted, making it a perfectly lovely time to do some blue chip swaps.
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Finance: What is a Blue Chip?18 Views
Finance a la shmoop, what is a blue-chip? Alright people think kids, plastic, poker
chipset, remember those cheap plastic poker chips? [Someone looking at their cards]
Yeah the the whites were supposed to be a penny [The money equivalents of the chips are shown]
the Reds were a nickel and the Blues the most highly valued chips in the set well
they were worth a dime and that's where the name came from the highly valued
blue chip and it refers to high-quality, highly valued companies Disney, Coke and [Logos of the blue chip companies]
in today's world Google, Amazon, Shmoop alright maybe not Shmoop. All right but
the rest of those companies are blue chips which have a long track record of [Blue chip stamp]
growing profits if not revenues for a very long period of time and they have
corporate cultures that are all about winning [People playing poker with their heads replaced by briefcases with company logos on them]
whatever game they're in so go blue, well sure them too... [Football player is tackled]
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