I'm trying to figure out how to price uneven FX swaps. I just started on a FX trading desk and have been told that the all-in rate for a 2-legged FX swap is equal to:
1) Quote for market side of net spot impact + pts. on far leg's side
I've also been told:
2) The rate of an uneven swap is equal to the sum of its two parts: the cost of the near and far legs summed.
Point 2 makes sense to me, but I cannot get the math to balance out to prove point 1 simultaneously. Is there a quoting convention for uneven FX swaps?
EURUSD spot = 1.1530/1.1535 (bid/ask)
EURUSD 6mo. points = .0183/.0185 (bid/ask)
Spread spot 30bps, spread pts. 10 bps
Client sells 10mm EUR near leg, buys 5mm EUR far leg.
1) By #1, 5mm * (LHS spot + RHS points)
Net spot impact (-10mm + 5mm) = -5mm EUR
-5mm *[(1.153 * 0.997) + ((1.153 + 0.0185)*0.001 + 0.00185)] = -5mm * 1.1525625 = -5,762,812.5 USD
2) By #2, -10mm * LHS spot + 5mm * (RHS spot + RHS pts)
Near leg cost = 1.153*(1 - 0.003)10mm = 1.149541-10mm = -11,495,410 USD
Far leg cost = [(1.1535 + 0.0185)0.001 + 0.0185 + 1.1535(1 + 0.003)]*5mm = 1.1766325 * 5mm = 5,883,162.5 USD Near leg + Far leg = -11,495,410 + 5,883,162.5 = -5,612,247.5 USD
The results of 1 & 2 do not match. Are points 1 & 2 both accurate? Am I miscalculating? Is there a way to quantify a single all-in rate for an uneven currency swap using the net spot impact?