Fairmat Example

The Cross Currency Swap is an agreement between two counterparties to exchange cashflows in a different currency.

In this tutorial we will show a particular fixed-float cross currency tutorial in which one party pays a fixed rate and receives, with the same frequency, a floating rate plus a spread.

For the purposes of pricing, the original instrument will be decomposed into elementary products: a fixed-float interest rate swap, a float-float cross currency basis swap and a basis swap.

The valuation of each swap was implemented by harmonizing the discounting and forwarding curves with different tenor (the so called "double curve" approach) and the two different currencies (by including the cross currency basis spread)

Note: this tutorial uses the Plain Vanilla plug-in.

Attachments

Cross Currency Tutorial