Questions tagged [cross-currency-basis]
The cross-currency-basis tag has no usage guidance.
39
questions
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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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0answers
53 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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0answers
103 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 ...
2
votes
2answers
156 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 ...
4
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0answers
263 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
105 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 ...
1
vote
1answer
124 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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0answers
34 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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0answers
69 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(...
1
vote
1answer
129 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 ...
0
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1answer
98 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
79 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 ...
2
votes
3answers
517 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
1k 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 ...
1
vote
1answer
290 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 ...
0
votes
1answer
187 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 ...
2
votes
2answers
384 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 ...
2
votes
2answers
686 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
votes
1answer
227 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?
0
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1answer
302 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 ...
2
votes
0answers
80 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 ...
4
votes
2answers
4k 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) ...
0
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1answer
253 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 ...
0
votes
1answer
834 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 ...
1
vote
1answer
181 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 ...
1
vote
1answer
400 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.
...
1
vote
1answer
210 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....
2
votes
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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vote
2answers
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, ...
6
votes
1answer
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 ...
1
vote
1answer
225 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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votes
1answer
593 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
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 ...
4
votes
1answer
169 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
854 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
votes
1answer
652 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 ...
1
vote
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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vote
2answers
808 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, ...
2
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0answers
183 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 ...
