6. May 2005

Cross Currency Swap Valuation

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.

Key words: interest rate swap, cross currency swap, basis spread

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