I am trying to calculate cross currency basis swaps for personal use. I generally understand what they are (essentially swapping one currency for another currency on a floating interest rate basis) but not how to calculate the basis. I have read quite a bit on them and understand the basis exists because the forward rate is higher/lower than justified by the interest rate differential according to CIP.
I have done the following for a 1 year EUR/USD cross currency basis swap
Take 3m libor and 3m euribor forward rate spreads, (2.03+.475)=2.505, (1.95+.55)=2.5, (1.605+.59)=2.195, (1.49+.62)=2.11. Then using the current EUR/USD 1YR forward of 2.89 bps subtract this from the IR differential which leaves a basis of -.385. Is this the correct way to calculate the 1 year cross currency basis swap?
If so how do you do this for a 3 month basis and a 5 year basis? When I use the same process for calculating a 3 month basis swap I get a figure in excess of 150bps which I know is not correct.