How to hedge FX Swap from a bank's perspective

nujoan · September 10th, 2006, 1:51 pm

Hi, one more qCan anyone suggest how does a bank to fully hedge the FX swap position, says a bank Sell-Buy USD against Euro, tenor 2 years?Is it a combination of USD IRS, EUR IRS, and FX SWAP?Thank you vm.

PaperCut · September 10th, 2006, 3:25 pm

Any floating interest rates in this structure? You'll probably hedge with a strip of eurodollar/euribor futures...

Icecloud · September 12th, 2006, 9:05 am

Offhand, you just do EUR IRS and USD IRS, and hedge the floating USD and EUR leg by doing money market transactions.Alternatively you can use Euro$/Euribor futures for the floating leg of the IRS.