Questions tagged [cross-currency-basis]

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Plotting a CSA curve in QuantLib

IRS under a CSA Let's consider an example of Interest Rate Swap under a CSA. To calculate discount factors that can be used to discount cashflows in one currency, $C_{1}$, collateralized in another ...
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64 views

Is there any data sources for historical arbitrage basis (e.g. on-the-run/off-the-run basis)?

I hope to get data going back as far as possible. Someone must have computed these things, but not sure if anyone has shared these data online? If not, if you know how I can get the data for the ...
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140 views

PV and Risk on a RFR cross currency swap

When pricing a XCCY basis on RFR (assuming USD CSA so under SOFR), for example ESTER versus SOFR (USD leg resettable) : I observed that the PV / Risk and also FX Delta are close to zero. I have been ...
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194 views

Why were cross-currency swap basis so close to zero before the financial crisis?

For instance, see the graphs below. Before the 2008 financial crisis, they were extremely close to zero. Why is that so? (https://www.sr-sv.com/wp-content/uploads/2019/02/CIP_01.png)
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29 views

How to price a Loan&borrowing deal(LNB) using cross currency basis?

I want to know how we can price a loan&borrowing(LNB) deal in USD using cross currency basis of my domestic currency is euro. For example, my domestic currency is Euro, I want to buy a LNB deal in ...
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1answer
100 views

FX Hedging costs when using 3m FX Fowards vs XCCY swaps for an IG Bond

Suppose I want to hedge the FX exposure of an USD Corp Bond(held to maturity) to GBP and I can choose between rolling 3m FX Forwards and XCCY swaps. How can I estimate the difference in the hedging ...
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102 views

Cheapest-to-deliver (CTD) discount curve II

This is a follow up question on this thread I have come across the following relationship in a CTD curve bootstrapping routine: $$\frac{DF_{XXX}^{CSA.EUR}}{DF_{EUR}^{CSA.EUR}} = \frac{DF_{XXX}^{CSA....
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3answers
126 views

Why might a cross currency swap from EUR into USD have higher CVA than a cross currency swap from USD into EUR?

I was having a discussion with a colleague in the industry, who mentioned in passing that CVA on a cross currency swap from EUR into USD (pay EUR) is always higher than if paying USD and receiving EUR....
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1answer
163 views

AUD funding rates

I am looking into into AUD rates and I am a little confused. I tried to summarise below my doubts. FX swap basis (difference between AUD FX swap implied rate and AUD OIS rate). Before covid-19 it has ...
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2answers
44 views

Is there ever a case where there are multiple ticks (different prices) at the same tick timestamp in Forex?

Say I'm receiving ticks for AUDUSD. The timestamp for Forex tick data seems to go down to a resolution of .001 second (milliseconds). Example: ...
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31 views

CCIRS Valuation - Discount rate adjustment

I am trying to value a CCIRS fixed USD vs fixed EUR in Bloomberg collaterized in EUR with a 10y maturity. Are there any adjustments I need to make to the USD vs EUR OIS discount curve as the NPV is ...
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74 views

Cross Currency Swap Bids and Offers?

Could someone please explain why certain Cross currency pairs like EURUSD or GBPUSD show higher bids then offers in Bloomberg? e.g for a 5y GBP/USD Xccy Swap bids could be at -5 bps and the offer at -...
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323 views

FX Delta of a cross currency basis swap

I would like to understand in which case there is a presence of FX delta risk factor when trading a Cross-currency basis swap. By FX Delta, I mean the sensitivy of my swap PV with respect to FX Spot ...
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2answers
285 views

What drives a downward move in the Xccy Basis curve?

this is something I wanted to understand for a while. For example, I observed recently the yields across the Mexico Xccy Basis curve have been decreasing 1-2 bps on last days. What could possibly ...
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268 views

FX American call option optimal exercise and holding region

Problem I am considering an American call option which gives a domestic investor the right to buy a unit of foreign currency at a strike of $K$ units of domestic currency. I have an exchange rate $S_t$...
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1answer
121 views

Forward EURUSD exchange rate for a Future date

Assume that on today's date as of 11/22/2020 the 1 year forward exchange rate for EUR/USD is ...
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1answer
112 views

Impact of fixing on the valuation of derivatives

I would like to know what is the impact of a fixing on the value of a fixed vs floating interest rate swap (IRS). Also, I have the same question about the fixing impact on a cross currency swap? On a ...
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3answers
422 views

Cross Currency Swap Attribution

Can you please recommend a paper/book that discusses the attribution of the mark to market of a cross currency swap (rates, basis, fx, etc.)?
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318 views

IFRS9 hedge accounting - fx risk hedge with Cross currency swap with notional reset

My understanding is that notional resetable cross currency swaps (MTM CCS) are very common amoung interbank markets, and MTM CCS are often used to hedge fx exposure. However, the notional resettable ...
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39 views

yield versus duration in cash-and-carry (basis) trade

I am trying to run a cash-and-carry (basis) trade. I'm having trouble understanding how to weigh the tradeoffs between yield, annualized yield and duration/time to expiry. Suppose we are in a ...
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1answer
195 views

Understanding CSA and novation

I had an example at work which I didn't have full intuition of. The example is as follows: You have novated a forward starting cross-currency basis swap (let's say 10y10y EUR ccbs). The PV is ...
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103 views

Dollar basis calculation. Where do I miss the point?

I read that recently, due to the covid-19, the pressure on the dollar market has risen significantly on the demand side. That is why the dollar basis became largly negativ. https://www.bloomberg.com/...
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90 views

Uncollateralized cross currency swap valuation

I want to value an uncollateralized cross-currency swap to exchange EURIBOR 6M for JIBAR 3M (Johannesburg Interbank Average Rate). I have a few questions: What discount curves should I use? From ...
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991 views

cross currency basis spread

Nowadays, most cross currency basis spread (against USD) is negative, while AUD, NZD basis spread against USD is positive. Can someone explain why these two are positive, unlike the rest?
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2k views

STIR topics: Implied FX-OIS Basis and FX Forward/Swap Pricing

if someone could provide some clarity on the below: What is meant by 'Implied FX-OIS Basis'? For example: "ON JPY trading at parity, 1W implied OIS basis moved 70BP" and "3M Implied OIS basis moved ...
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355 views

why is ADBSC currency positive?

Hi guys I am new to cross currency. Could anyone explain why ADBSC <curncy> (Australian Dollar 3 month cross currency basis) in Bloomberg is always ...
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2answers
284 views

Cross Currency Swap - is par basis supposed to change while OIS discounting rate is changing?

Assume a USDJPY cross currency basis swap priced using usd ois & usdjpy basis curve as discounting, and usd libor & jpy libor as projection curve. Now if usd ois is moving in the market while ...
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2answers
540 views

Understanding Mechanics and Specifics of Cross-Currency Basis Swap

I am looking at a Bloomberg Ticker for the JPY-USD Basis Swap (JYBS5 BGN Curncy). This is a 5yr term, settling on Dec 05 2019 and maturing on Dec 05 2024. The last price is -41. Several questions I ...
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2answers
908 views

convexity adjustment for pricing mark to market (mtm) cross currency swap

may I know where the convexity adjustment is from and in practice, how is it usually calculated? is it coming from the correlation between fx and rates ? am I right that non-mtm cross currency swap ...
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1answer
370 views

What does **Long Call EURUSD** mean?

What does Long Call EURUSD mean? Does it mean Long Call EUR and Short Put USD? When we draw payoff do we consider only w.r.t. to CCY1 i.e. EUR in this case?
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419 views

Relation between ATM, RR and BF

In FX derivative market, why does vol spread of ATM > RR > BF? ATM is the most liquid and intuitively it should have the lowest spread. Please help me in understanding the rational behind the above ...
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1answer
112 views

Valuing TRYUSD currency swap on Bloomberg

Usually a leg in a swap is discounted using the corresponding OIS curve if the deal is collateralized and if collateral is posted in a different currency teh discounting happens with the corresponding ...
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2answers
5k views

Calculating Cross Currency basis swaps

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) ...
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1answer
380 views

Cross Currency swap - Bond Yields arbitrage

Could somebody explain me step-by-step how can I compute the cross-currency yield of a bond bought by a foreign investor and x-ccy swapped back into his domestic currency? I basically would like to ...
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1k views

Mark-to-market cross-currency basis swap valuation

I'm looking to replicate the EUR vs USD cross-currency basis curve that Bloomberg outputs (EUR.OIS collateralized in USD). I understand that Bloomberg is currently using the mark-to-market ...
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1answer
214 views

Cross currency swap basis with USD added on the covered interest rate parity (CIP)

We know the adjusted covered interest rate parity (CIP): $$Forward = \dfrac{1+r\cdot\tau+b}{1+r^*\cdot\tau+b^*}Spot$$ Here $r/r^*$ is the risk-free foreign/domestic rate and $b/b^*$ is the cross ...
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511 views

Cross currency basis swap for bonds

Running a cross currency swap on a GBP issued 2.75% 7yr bond (i.e a bullet), with funding in USD so need to determine the equivalent in USD. The GBP bond trades at circa 180bps over the Gilt. ...
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215 views

Xccy without back notional exchange

Let’a Say i’m Trading a 1bln € EUR-USD fixed-fixed cross currency starting in 3M. My USD notional is fixed at today’s spot. Two cases: - back and front notional exchange. -Only front notional exchange....
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1k views

Calculating Fx Swap from Cross Currency Swap

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 ...
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2k views

bootstrapping a basis curve to get a forward basis curve

suppose i have a trade whose payoff underlying is 3m libor minus 1m libor. the standard approach is to bootstrap seperately 2 projection curves: a) a 3m projection curve, b) a 1m proj curve. however, ...
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4k views

Cheapest-to-deliver (CTD) discount curve

Can someone explain, in layman's terms, the mechanics (the algorithm steps) of the construction of the discount curve in the case when the CSA allows the posting party to choose a currency (from a ...
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1answer
237 views

Valuing a cross currency basis swap using a third currency as a collateral

Suppose India and South Africa goes into a cross currency basis swap. But the collateral is specified upon USD. How does one value this type of swaps? Or is it even available directly on the markets?
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652 views

Interpolating cross-currency basis curve

Just wondering how do people "interpolate" between different "pillar dates" on a cross-currency basis curve? So say for example, if the observed spot is 1.5, observed CC basis for 9 months is -1.25 ...
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1k views

How to use USD OIS discounting for local currency uncollateralised swaps?

I am wanting to do MTM valuations of uncollateralised swaps as our banks have switched to using the USD OIS curve for their discounting (assuming no xVA adjustments). None of the cashflows we are ...
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1answer
171 views

Existential question about currency exchange Risk Factor

Ciao All, I'm working to a problem about sensitivities for products with several ccy and this questions came out. For simplicity consider a linear product (a simple cash flow) w.r.t. the ccy ...
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968 views

What discount rate for uncollateralized cross currency swaps?

To expand on this question, what happens if the uncollateralized swap is of a cross currency variety? Ignoring any xVAs, it's unclear which currency would best determine the discount rate: a) we ...
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1answer
719 views

Quanto effect in cross currency mtm swaps

Apparently the standard way to value these swaps involves ignoring the quanto effect, - ie the correlation between fx and rates. I wonder why this is - is this correl always so close to zero? Eg of ...
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2answers
7k views

What is the EUR swap curve on Bloomberg? I.e. what is the EUR equivalent of S23 curve on Bloomberg?

I am trying to understand the currency basis calculation and whether there is a difference in currency basis when quoted vs. OIS and -IBOR rates.
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2answers
878 views

Cross Currency Basis Swap

I understand that there exist a cross Currency Basis between euro and dollar of about 35 bps, which in my understanding can be arbitraged out by following principle of interest rate parity. However, ...
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187 views

Risk neutral drift in presence of xccy basis

Suppose I invest in an EUR denominated fund. This fund invests fully in USD stocks and doesn't hedge it's FX exposure (i.e. the EUR value of this fund is just equal to the USD value of the holdings ...