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I am trying to calculate Fx Swap points of a currency pair from the corresponding Cross Currency Swap rate on the same maturity. I.e if I know that my USD/TRY 5Y rate is 16% and my USD/TRY spot rate is 4.62, how can I get the USD/TRY 5Y Fx Swap expressed in points?

Best Regards, Rob

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  • $\begingroup$ You cannot. The cross currency swap $\endgroup$
    – AFK
    Jul 3, 2018 at 15:05

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You have 16% fixed TRY versus 3mo Usd Libor.
Step1: fix out the usd leg using the fair usd swap rate (say 3pct). -> 16% fixed TRY vs 3% fixed USD.
Step2: convert these to zero coupon rates. You need information about other points on the curve to do this properly. Assume here that both curves are flat so that zero coupon rates = regular rates ~> 16% zero cpn fixed TRY vs 3% zero cpn fixed usd.
Step 4: calculate the forward fx rate = 4.62* ( 1.16/1.03)^5 From which you subtract 4.62 to get the forward points.

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If you have cross currency pricing curve and a corresponding swap pricer at hand, you can model a zero coupon cross currency swap, calculate the zero coupon rate on each leg with zero initial MTM. The swap pricer usually provide the accrued interest on each leg at maturity. Adding the par amount of each leg you can get the final exchange amount. The ratio of the two final exchange amount is the forward FX rate. Taking the difference from the spot FX rate and times 10,000, you get the forward points.

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