Reply To: Cross Currency Swap Valuation

[Roland Lichters]

Hi Roland,

following up on Niall’s comments, please have a look at Example_8. It covers pricing and exposure simulation for a cross currency swap, so the set up we have chosen there takes cross currency basis into account, and it is assuming EUR collateral.

In Examples/Example_8/Input/ore.xml we say that we want to use the market configuration “collateral_eur”.

In Examples/Input/todaysmarket.xml you then see that this means we use the following discount curves

Yield/EUR/EUR1D
Yield/USD/USD-IN-EUR
Yield/GBP/GBP-IN-EUR
Yield/CHF/CHF6M
Yield/JPY/JPY6M

i.e. Eonia discounting in EUR and e.g. a USD-IN-EUR for discounting USD cash flows.

And finally in Examples/Input/curveconfig.xml you will find the following which defines how the USD-IN-EUR curve is constructed from FX Forwards and Cross Currency Basis Swaps:

USD-IN-EUR
USD collateralized in EUR discount curve
USD



FX Forward

FXFWD/RATE/EUR/USD/3M
FXFWD/RATE/EUR/USD/6M
FXFWD/RATE/EUR/USD/9M
FXFWD/RATE/EUR/USD/12M

EUR-USD-FX-CONVENTIONS
EUR1D
FX/RATE/EUR/USD


Cross Currency Basis Swap

CC_BASIS_SWAP/BASIS_SPREAD/USD/3M/EUR/3M/2Y
CC_BASIS_SWAP/BASIS_SPREAD/USD/3M/EUR/3M/3Y
CC_BASIS_SWAP/BASIS_SPREAD/USD/3M/EUR/3M/4Y
CC_BASIS_SWAP/BASIS_SPREAD/USD/3M/EUR/3M/5Y
CC_BASIS_SWAP/BASIS_SPREAD/USD/3M/EUR/3M/7Y
CC_BASIS_SWAP/BASIS_SPREAD/USD/3M/EUR/3M/10Y

CC_BASIS_SWAP/BASIS_SPREAD/USD/3M/EUR/3M/15Y
CC_BASIS_SWAP/BASIS_SPREAD/USD/3M/EUR/3M/20Y
CC_BASIS_SWAP/BASIS_SPREAD/USD/3M/EUR/3M/30Y
CC_BASIS_SWAP/BASIS_SPREAD/USD/3M/EUR/3M/40Y
CC_BASIS_SWAP/BASIS_SPREAD/USD/3M/EUR/3M/50Y

EUR-USD-XCCY-BASIS-CONVENTIONS
EUR1D
FX/RATE/EUR/USD USD3M EUR3M

Discount
LogLinear
A365
0.000000000001

I hope that helps.
Regards,
Roland