Questions tagged [cross-currency-basis]

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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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0answers
46 views

Switching between collateral currencies in a xccy swap

Suppose the following: A xccy.basis swap EUR for USD. Having obtained relevant discounting and forwarding curves in both currencies respectively (i.e. OIS, LIBOR, EURIBOR), and spot exchange rate FX(...
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1answer
71 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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1answer
84 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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0answers
64 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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3answers
177 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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1answer
453 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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1answer
165 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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1answer
138 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
253 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
421 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 ...
2
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1answer
121 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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1answer
181 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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0answers
75 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
2k 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
159 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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1answer
657 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
139 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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1answer
280 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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1answer
197 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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2answers
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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2answers
1k 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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1answer
3k 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 ...
1
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1answer
216 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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1answer
527 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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1answer
895 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
165 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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1answer
744 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 ...
2
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1answer
580 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
6k 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
750 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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0answers
171 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 ...