Home / Reply To: Cross Currency Swap Valuation

Home Forums Getting Started Cross Currency Swap Valuation Reply To: Cross Currency Swap Valuation


Hi Roland,

You are free to configure ORE however you like, depending on your requirements, some examples include:

1) Old fashioned, Single curve, Libor discounting, just set the correct curve spec in todaysmarket.xml for discounting with libor curves

2) OIS discounting: Bootstrap FedFunds for USD flows, Eonia for EUR and TOIS or SARON for CHF, again just configure it in todays market, of course this will not capture the basis.

3) XOIS discounting: Assume a single collateral currency, e.g. USD, use FedFunds for USD discounting and then build “CHF IN USD” and “EUR IN USD” curves as you have seen. This will use USD/CHF and EUR/USD basis swap quotes in the bootstrap, but you do not see them in todaysmarket as such, rather the curves are set-up correctly and discounting / pricing is done as with a vanilla swap.

In all cases everything will be priced, we have tried not to put in any restrictions or assumptions, that is left to the user.

It sounds like you want to do (3) but with your CHF/EUR swap you are not assuming USD collateral but rather want to assume EUR or CHF, is that correct? so you are not assuming that the trades are in the same netting set. In that case the simplest thing for you to do is have two configurations (one EUR based and one USD based) and either run ORE twice or build a new application that can switch between the two configurations for different trades based on rules that you decide, we have not imposed any logic or assumptions on which curves are used to discount each cash flow.

Hope that helps, I’m confident you can reproduce the prices you are looking for, it’s just a matter of configuration.