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Cross Currency Swap Valuation


Wolfram Boenkost


Lucht Probst Associates GmbH

Wolfgang M. Schmidt


Frankfurt School of Finance & Management Gemeinnützige GmbH

May 6, 2005


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.

Number of Pages in PDF File: 15

Keywords: interest rate swap, cross currency swap, basis spread

JEL Classification: G13

working papers series





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Date posted: April 9, 2009  

Suggested Citation

Boenkost, Wolfram and Schmidt, Wolfgang M., Cross Currency Swap Valuation (May 6, 2005). Available at SSRN: http://ssrn.com/abstract=1375540 or http://dx.doi.org/10.2139/ssrn.1375540

Contact Information

Wolfram Boenkost
Lucht Probst Associates GmbH ( email )
Grosse Gallusstr. 9
Frankfurt, 60311
Germany
HOME PAGE: http://www.l-p-a.com
Wolfgang M. Schmidt (Contact Author)
Frankfurt School of Finance & Management Gemeinnützige GmbH ( email )
Sonnemannstraße 9-11
Frankfurt am Main, 60314
Germany
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