Business and Personal Finance Dictionary

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• NONDELIVERABLE SWAPS
  
  A Swap (q.v.) that would be equivalent ideally to a Cross-Currency Swap (q.v.), except that it settles instead in USD. Typically, the NDS omits delivery of the underlying currency at maturity. In simpler cases, the parties offset this omission with the appropriate Nondeliverable Forward (q.v.). In more complicated cases, the parties don't offset it, and pricing is more difficult. "One player at a U.S. bank uses a combination of risk tolerance, onshore interest rate levels and her own currency forecast to price NSDs." The NDS's appeal stems largely from its ability to circumvent prohibitions against converting currencies at market prices. (Source: William Rhode, "Learning Curve: Nondeliverable Swaps, Derivatives Week, 5/5/97.)
  
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