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Title:Cross currency swap valuation PDF Logo
Authors:Boenkost, Wolfram
Schmidt, Wolfgang M.
Issue Date:2004
Series/Report no.:CPQF Working Paper Series 2
Abstract:Cross currency swaps are powerful instruments to transfer assets or liabilities from one currency into another. The market charges for this a liquidity premium, the cross currency basis spread, which should be taken into account by the valuation methodology. We describe and compare two valuation methods for cross currency swaps which are based upon using two different discounting curves. The first method is very popular in practice but inconsistent with single currency swap valuation methods. The second method is consistent for all swap valuations but leads to mark-to-market values for single currency off market swaps, which can be quite different to standard valuation results.
Subjects:interest rate swap
cross currency swap
basis spread
JEL:G13
Document Type:Working Paper
Appears in Collections:CPQF Working Paper Series, Frankfurt School of Finance and Management

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