Given we know the
- Trade Price
- Currency in which the Bond Pays Coupons
- FX Rate from Bond Currency to USD
Trying to understand if a Bond can have FX Delta Risk and how it should be computed?
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Assuming your reporting is in USD.
Assume that by "trade price" you mean "clean price", ex accrued. Most coupon bonds are quoted like that.
If you unwind the bond position today, settling T + some n, like 2 days, then the proceeds will be notional * (clean price + accrued coupon until the settlement date) in the currency of the bond on the settlement date. You can convert these foreign currency proceeds into USD in a separate transaction, using the spot exchange rate. Logically, this should just be the USD mark to market, but you may need some arbitrary bookkeeping to separate the principal from the accrued.
If, ceteris paribus, the exchange rate moves: the currency of the bond appreciates / depreciates versus USD, then the USD proceeds increases / decreases. This sensitivity is where the FX delta comes from.
If you conveniently define the FX delta to be the exposure scaled to 100%, then the FX delta is exactly the proceeds if you unwind now.