Cross Currency Swap Valuation

15 Pages Posted: 9 Apr 2009

See all articles by Wolfram Boenkost

Wolfram Boenkost

Lucht Probst Associates GmbH

Wolfgang M. Schmidt

Frankfurt School of Finance & Management

Date Written: May 6, 2005


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.

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

JEL Classification: G13

Suggested Citation

Boenkost, Wolfram and Schmidt, Wolfgang M., Cross Currency Swap Valuation (May 6, 2005). Available at SSRN: or

Wolfram Boenkost

Lucht Probst Associates GmbH ( email )

Grosse Gallusstr. 9
Frankfurt, 60311


Wolfgang M. Schmidt (Contact Author)

Frankfurt School of Finance & Management ( email )

Adickesallee 32-34
Frankfurt am Main, 60322