IDEAS home Printed from https://ideas.repec.org/p/zbw/cpqfwp/2.html
   My bibliography  Save this paper

Cross currency swap valuation

Author

Listed:
  • Boenkost, Wolfram
  • Schmidt, Wolfgang M.

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.

Suggested Citation

  • Boenkost, Wolfram & Schmidt, Wolfgang M., 2004. "Cross currency swap valuation," CPQF Working Paper Series 2, Frankfurt School of Finance and Management, Centre for Practical Quantitative Finance (CPQF).
  • Handle: RePEc:zbw:cpqfwp:2
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/40176/1/481304045.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Polleit, Thorsten, 2004. "The slowdown in German bank lending - revisited," Frankfurt School - Working Paper Series 53, Frankfurt School of Finance and Management.
    2. Heidorn, Thomas & Gerhold, Mirko, 2004. "Investitionen und Emissionen von Convertible Bonds (Wandelanleihen)," Frankfurt School - Working Paper Series 50, Frankfurt School of Finance and Management.
    3. Gerdesmeier, Dieter & Roffia, Barbara, 2005. "The relevance of real-time data in estimating reaction functions for the euro area," The North American Journal of Economics and Finance, Elsevier, vol. 16(3), pages 293-307, December.
    4. Chevalier, Pierre & Heidorn, Thomas & Krieger, Christian, 2003. "Temperaturderivate zur strategischen Absicherung von Beschaffungs- und Absatzrisiken," Frankfurt School - Working Paper Series 49, Frankfurt School of Finance and Management.
    5. Heidorn, Thomas & Siragusano, Tindaro, 2004. "Die Anwendbarkeit der Behavioral Finance im Devisenmarkt," Frankfurt School - Working Paper Series 52, Frankfurt School of Finance and Management.
    6. Wallner, Christian & Wystup, Uwe, 2004. "Efficient computation of option price sensitivities for options of American style," CPQF Working Paper Series 1, Frankfurt School of Finance and Management, Centre for Practical Quantitative Finance (CPQF).
    7. Becker, Gernot M. & Seeger, Norbert, 2003. "Internationale Cash Flow-Rechnungen aus Eigner- und Gläubigersicht," Frankfurt School - Working Paper Series 48, Frankfurt School of Finance and Management.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Inklaar, Robert & Koetter, Michael & Noth, Felix, 2012. "Who's afraid of big bad banks? Bank competition, SME, and industry growth," Frankfurt School - Working Paper Series 197, Frankfurt School of Finance and Management.
    2. Dietmar Harhoff & Elisabeth Mueller & John Van Reenen, 2014. "What are the Channels for Technology Sourcing? Panel Data Evidence from German Companies," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 23(1), pages 204-224, March.
    3. Boeing, Philipp & Mueller, Elisabeth & Sandner, Philipp, 2012. "What makes Chinese firms productive? Learning from indigenous and foreign sources of knowledge," Frankfurt School - Working Paper Series 196, Frankfurt School of Finance and Management.
    4. Alfeus, Mesias & Grasselli, Martino & Schlögl, Erik, 2020. "A consistent stochastic model of the term structure of interest rates for multiple tenors," Journal of Economic Dynamics and Control, Elsevier, vol. 114(C).
    5. Mesias Alfeus, 2019. "Stochastic Modelling of New Phenomena in Financial Markets," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 1-2019, January-A.
    6. repec:uts:finphd:41 is not listed on IDEAS
    7. Kostka, Genia & Moslener, Ulf & Andreas, Jan G., 2011. "Barriers to energy efficiency improvement: Empirical evidence from small-and-medium sized enterprises in China," Frankfurt School - Working Paper Series 178, Frankfurt School of Finance and Management.
    8. Alexander Libman & Vladimir Kozlov & André Schultz, 2012. "Roving Bandits in Action: Outside Option and Governmental Predation in Autocracies," Kyklos, Wiley Blackwell, vol. 65(4), pages 526-562, November.
    9. Yu, Xiaofan, 2011. "A spatial interpretation of the persistency of China's provincial inequality," Frankfurt School - Working Paper Series 171, Frankfurt School of Finance and Management.
    10. Becker, Christoph & Wystup, Uwe, 2005. "On the cost of delayed currency fixing announcements," CPQF Working Paper Series 3, Frankfurt School of Finance and Management, Centre for Practical Quantitative Finance (CPQF).
    11. Boenkost, Wolfram & Schmidt, Wolfgang M., 2006. "Interest rate convexity and the volatility smile," CPQF Working Paper Series 4, Frankfurt School of Finance and Management, Centre for Practical Quantitative Finance (CPQF).
    12. Böing, Philipp & Müller, Elisabeth, 2012. "Technological Capabilities of Chinese Enterprises: Who is Going to Compete Abroad?," VfS Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62081, Verein für Socialpolitik / German Economic Association.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dietmar Harhoff & Elisabeth Mueller & John Van Reenen, 2014. "What are the Channels for Technology Sourcing? Panel Data Evidence from German Companies," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 23(1), pages 204-224, March.
    2. Boeing, Philipp & Mueller, Elisabeth & Sandner, Philipp, 2012. "What makes Chinese firms productive? Learning from indigenous and foreign sources of knowledge," Frankfurt School - Working Paper Series 196, Frankfurt School of Finance and Management.
    3. Becker, Christoph & Wystup, Uwe, 2005. "On the cost of delayed currency fixing announcements," CPQF Working Paper Series 3, Frankfurt School of Finance and Management, Centre for Practical Quantitative Finance (CPQF).
    4. Alexander Libman & Vladimir Kozlov & André Schultz, 2012. "Roving Bandits in Action: Outside Option and Governmental Predation in Autocracies," Kyklos, Wiley Blackwell, vol. 65(4), pages 526-562, November.
    5. Boenkost, Wolfram & Schmidt, Wolfgang M., 2006. "Interest rate convexity and the volatility smile," CPQF Working Paper Series 4, Frankfurt School of Finance and Management, Centre for Practical Quantitative Finance (CPQF).
    6. Böing, Philipp & Müller, Elisabeth, 2012. "Technological Capabilities of Chinese Enterprises: Who is Going to Compete Abroad?," VfS Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62081, Verein für Socialpolitik / German Economic Association.
    7. Yu, Xiaofan, 2011. "A spatial interpretation of the persistency of China's provincial inequality," Frankfurt School - Working Paper Series 171, Frankfurt School of Finance and Management.
    8. Kostka, Genia & Moslener, Ulf & Andreas, Jan G., 2011. "Barriers to energy efficiency improvement: Empirical evidence from small-and-medium sized enterprises in China," Frankfurt School - Working Paper Series 178, Frankfurt School of Finance and Management.
    9. Herrmann-Pillath, Carsten, 2010. "Rethinking evolution, entropy and economics: A triadic conceptual framework for the maximum entropy principle as applied to the growth of knowledge," Frankfurt School - Working Paper Series 146, Frankfurt School of Finance and Management.
    10. Hübsch, Arnd & Walther, Ursula, 2012. "The impact of network inhomogeneities on contagion and system stability," CPQF Working Paper Series 32, Frankfurt School of Finance and Management, Centre for Practical Quantitative Finance (CPQF).
    11. Löchel, Horst & Pecher, Florian, 2008. "The strategic value of investments in Chinese banks by foreign financial institutions," Frankfurt School - Working Paper Series 91, Frankfurt School of Finance and Management.
    12. Andriani, Pierpaolo & Herrmann-Pillath, Carsten, 2011. "Transactional innovation and the de-commoditization of the Brazilian coffee trade," Frankfurt School - Working Paper Series 162, Frankfurt School of Finance and Management.
    13. Löchel, Horst & Li, Helena Xiang, 2011. "Understanding the high profitability of Chinese banks," Frankfurt School - Working Paper Series 177, Frankfurt School of Finance and Management.
    14. Roßbach, Peter & Karlow, Denis, 2011. "The stability of traditional measures of index tracking quality," Frankfurt School - Working Paper Series 164, Frankfurt School of Finance and Management.
    15. Klein, Michael, 2012. "Infrastructure policy: Basic design options," Frankfurt School - Working Paper Series 185, Frankfurt School of Finance and Management.
    16. C. Herrmann-Pillath, 2011. "A Neurolinguistic Approach to Performativity in Economics," Voprosy Ekonomiki, NP Voprosy Ekonomiki, issue 2.
    17. Beyna, Ingo & Wystup, Uwe, 2010. "On the calibration of the Cheyette interest rate model," CPQF Working Paper Series 25, Frankfurt School of Finance and Management, Centre for Practical Quantitative Finance (CPQF).
    18. Umber, Marc P. & Grote, Michael H. & Frey, Rainer, 2010. "Europe integrates less than you think: Evidence from the market for corporate control in Europe and the US," Frankfurt School - Working Paper Series 150, Frankfurt School of Finance and Management.
    19. Susanne Griebsch & Uwe Wystup, 2011. "On the valuation of fader and discrete barrier options in Heston's stochastic volatility model," Quantitative Finance, Taylor & Francis Journals, vol. 11(5), pages 693-709.
    20. Herrmann-Pillath, Carsten, 2011. "The evolutionary approach to entropy: Reconciling Georgescu-Roegen's natural philosophy with the maximum entropy framework," Ecological Economics, Elsevier, vol. 70(4), pages 606-616, February.

    More about this item

    Keywords

    interest rate swap; cross currency swap; basis spread;
    All these keywords.

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:cpqfwp:2. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/hfbfide.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.