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Application of Reciprocal Currency Rates and Triangular Arbitrage in FX Trading

After nearly a decade as a software engineer in finance, I find myself grappling with a question about FX trading that I've always hesitated to ask, particularly concerning the calculation of ...
seldonzzz's user avatar
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63 views

Test Formula for Cross-Currency Basis by Using S, F and Rates. What Rates to Use?

I am trying to recreate the charts on slide 6 on the below. Basically "test" the formula for the cross-currency basis for EURUSD. I am using as target EUXOQQ1 BGN Crncy, which is the ESTRON ...
RickRiederFan's user avatar
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Arbitrage finding in the currencies markets

I was wondering whether anyone can improve on the following arbitrage finding scheme in the currencies market. The following is modified from the book of Capinaki and Zastawniak called Mathematics for ...
Joselin Jocklingson's user avatar
1 vote
2 answers
168 views

How do we price a Non-USD currency FX Forward pair by using cross-currency basis for each currency?

For e.g., when pricing a GBPUSD FX-Forward we build the USD SOFR curve through which we get USD risk-free rate. For the GBP risk-free rate, we use the sum of GBPUSD Basis and SONIA. However, if we ...
humanoid's user avatar
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1 answer
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ConstNotionalCrossCurrencyBasisSwapRateHelper in QuantLib doesn't give expected result

I'm trying to bootstrap to get discount curve based on cross currency basis swap using ConstNotionalCrossCurrencyBasisSwapRateHelper in QuantLib. As a test, I tried to bootstrap the discount curve ...
Fei's user avatar
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Should xccy basis be added before bootstrapping (to swap curve) or after bootstrapping (to zero curve)?

I am trying to bootstrap a GBP zero curve off of a GBP swap (par) curve inclusive of xccy basis (vs USD). Say I have my two curves (swap and basis) - would I sum these and then bootstrap to get zeros, ...
soju's user avatar
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determine cross currency basis spread in illiquid markets

I have a very special case, where a client needs a quote on a cross currency basis swap EUR/DEV, DEV is a hypothetical currency where the market for cross currency swaps is inexistant. client wants to ...
Eamon's user avatar
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How does Bloomberg compute the cross currency swap basis?

First, look at the FXFA for EURUSD The EUR and USD Yield & FX swap rate on 10/18/2023 are given as: The computations are shown in this answer. ........................................................
Engin YILMAZ's user avatar
2 votes
2 answers
2k views

How to Bloomberg compute the implied Yield ? What is FX swap basis spread?

Question 1: You can see Bloomberg EUR/USD FXFA<go> page attached below EUR 3 months yield=3.9412 US 3 months yield= 5.6683 Spot Rate: 1.0580 How does it find FX swap rate as 1.062732? Question ...
Engin YILMAZ's user avatar
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EM currency bond pricing and swaps

EM ccy denomimated bonds (such as MXN, TRY) are often priced using cross currency swap rate (MXN-USD, etc). I guess this is because their fundings are in USD. My question is who are the participants ...
neko's user avatar
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Comparison shorted dated tbills and determine which asset class is best return

i was wondering how to create a comparison table across various time horizons for given currencies and see the return/spread over SOFR. Any Bloomberg links/functions i could use? Ideally i would like ...
Esteban's user avatar
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371 views

Substituting the basis swap for the FX forward

I have come across a response to the question titled "Cross currency swap a combination of 2 Interest rate swap" on this site. There, it is stated the following: Long story short: As @...
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1 answer
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XCS and FX swaps: market risks

XCS (cross currency swap) can be: Float vs float #1 Fixed vs fixed #2 Float vs fixed #3 #2 can be constructed with 2 fixed vs float irs and 1 xccy basis swap #1 #3 can be constructed with 1 irs and ...
Jamesr's user avatar
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2 answers
156 views

Comparing debt issuance across currencies [closed]

Imagine I’m a European corporate thinking of issuing a bond in either GBP or EUR. I have the spread above gilts for a GBP transaction and a spread above mid swaps for EUR. How do I see which one would ...
Check122's user avatar
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121 views

Can you actually earn the carry return in FX? [closed]

I know that carry is an important factor to value currency. However, it is not obvious to me how you can actually earn the carry return, and if as a pure currency investor, should not you be ...
Peter's user avatar
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Cost of carry when holding a foreign ccy bond

In the search of yield holding HY bonds in EM markets seems to be a theme that gains traction. In order to calculate the P&L correctly I just wanted to see I have it correct! Assumption is Borrow ...
SwapperAtPar's user avatar
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Improving Fixed-Fixed Cross-Currency Swap Pricing in Python with Limited Data and Quantlib

I am working on creating a fixed-fixed cross-currency swap pricer in Python for EUR-USD and GBP-USD pairs. Here's my current approach: Bootstrap a GBP SONIA curve. Bootstrap a SOFR curve. Obtain the ...
AB123's user avatar
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Most relevant papers on IR / discount rate(s) modelling in the last 5 years

As the question states, what are some relevant recent papers I, as a non-expert, should read on IR modelling, products, and mechanics (that do not involve AI/ML)? I think my knowledge on this topic ...
Frido's user avatar
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4 votes
3 answers
575 views

pricing in the case where payment currency and collateral currency are different?

I'm asking for the curve construction of the discount curve in the case where payment currency and collateral currency are different. If I refer to BBG, in the case of a USD swap collateralized in EUR,...
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Cross-currency Swaps - discounting used for calculating collateral posting in different currencies

When finding the value of a cross currency swap you need to take into account the collateral posting currency of the CSA agreement and adjust the discount factors accordingly, see this reference for ...
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Cross currency swap a combination of 2 Interest rate swap [closed]

I was told that a Cross currency swap can be thought of as a portfolio of 2 different interest rate swaps. Reference link : https://cvacentral.com/wp-content/uploads/2020/06/Chapter-11-Appendices-4E....
augustine's user avatar
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1 answer
115 views

PIP Value conversion - How can I convert my Pips? general formula [closed]

So I was wondering, how I can convert for example a 20 pips charge is(Spot: 1.0250 with pips 1.0270) on EURUSD into EURCNH Pips with (Spot EURCNH at 7.3005). Is there a general formula and short-cut? ...
Mostdoisneverdone's user avatar
1 vote
2 answers
713 views

STIR Topics: XCCY pricing and trilemma between SOFR, FF & FRA

Question on STIR. Suppose we sell a 3m JPY swap with spot start date, and we are able to back out the 3m implied JPY forward points (hence swap points), using 3m JPY OIS (3m TONA) and 3m USD OIS (3m ...
fauxpas's user avatar
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2 votes
2 answers
674 views

Which Day Count Convention applies in a Cross Currency Swap

What is the rule (assuming there is one) specifying which day count convention should prevail in a cross-currency swap? For example, where EUR follows ACT/360 and GBP follows ACT/365, which of the two ...
error404's user avatar
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87 views

Currency swap deals between countries

Amidst bankruptcy situation in Sri-lanka, India is said to have come to rescue Sri-lanka, and entered into a currency swap deal as referenced here - https://www.cbsl.gov.lk/en/news/cbsl-enters-into-...
Bogaso's user avatar
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3 votes
0 answers
317 views

OIS floating-floating cross-currency basis swap

I'm trying to understand whether notional resets on a floating-floating cross-currency basis swap play a role or not when the coupon payments are SOFR-based (with no spread) and they are discounted ...
FunnyBuzer's user avatar
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3 votes
3 answers
505 views

Should Cross-Currency Basis Swaps exchanging risk free rates trade flat?

In the paper "Interest Rate Parity, Money Market Basis Swaps, and Cross-Currency Basis Swaps" by Bruce Tuckman and Pedro Porfirio (2003) the authors claim that cross-currency basis swap ...
emot's user avatar
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Cross currency basis swaps to build interest rate curves

I was speaking with someone in the market the other day who complained that: "...we always have difficultly building the front end of the curve". He then went on to say that he builds ...
equanimity's user avatar
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Cross Currency equivalent swap

I am reaching out for some help to get an equivalent basis in another currency. I would like to buy a FRN with a current spread SONIA 1M + 35 bps. And I would like to have the equivalent spread in ...
user90783's user avatar
1 vote
1 answer
77 views

Simple cross-rate table question

I am trying to self-study and came across this question, I am not sure how to answer this. I think I should transform all of the product's quoted prices to USD then compare them, is that correct? The ...
user4933's user avatar
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1 vote
1 answer
191 views

Simple three-pair triangulation question

I have a question I came across whilst self-studying and I need to use cross-currency triangulation. I am not too sure how to apply the cross-rate formula, and was hoping someone could show me how to ...
user4933's user avatar
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2 votes
1 answer
504 views

cross currency basis swap instrument in Quantlib [duplicate]

I have noticed that there is a cross currency basis swap rate helper added to the Quantlib new release. However, I could not find the instrument cross currency basis swap. I assume the helper is added ...
Levan's user avatar
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2 votes
1 answer
429 views

Why has cross currency basis become higher since the 2008 crisis?

The impact of cross currency basis on FX forward pricing has become more noticeable since 2008, diverging significantly from the interest rate differential, what are the fundamentals behind this ...
Nicolas B's user avatar
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1 answer
268 views

Why do we theoretically have to take cross currency basis volatility into account when constructing Cheapest To Deliver (CTD) discount curves?

Let's take a collateralized USD IRS where there is optionality in collateral currency. My understanding is that it is standard practice to compute forward XXX/USD OIS basis curves for all currencies ...
user57086's user avatar
1 vote
2 answers
355 views

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 ...
BankWorkerBMA's user avatar
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1 answer
95 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 ...
Slow Learner's user avatar
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2 votes
0 answers
383 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 ...
Rich.G's user avatar
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5 votes
1 answer
320 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)
Slow Learner's user avatar
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0 answers
49 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 ...
Jaya Mohan's user avatar
2 votes
1 answer
717 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 ...
Gigi B's user avatar
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1 answer
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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....
Frank Cho's user avatar
1 vote
3 answers
368 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....
Alex's user avatar
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2 votes
1 answer
526 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 ...
Student's user avatar
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2 answers
106 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: ...
skeetastax's user avatar
1 vote
0 answers
311 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 -...
Johnny Treawoski's user avatar
1 vote
0 answers
2k 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 ...
Rich.G's user avatar
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3 votes
2 answers
917 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 ...
F0l0w's user avatar
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4 votes
0 answers
328 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 $S_t$...
user107224's user avatar
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1 answer
145 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 ...
Daniel's user avatar
  • 377
-1 votes
1 answer
269 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 ...
Jaya Mohan's user avatar