pricing a cross currency swap
Posted: March 25th, 2011, 11:04 am
Hi,I tried to go through old discussions but wasn't able to find a satisfactory answer. I assume my question should be an easy one: how to price a fixed-to-floating cross currency swap. I am receiving fixed coupon in CHF and paying Euribor 3m + xIt seems that there are 2 alternatives:1. EUR-leg: use 3m forward curve and 3m discount curve for EUR floating leg. CHF-leg: Discount CHF cashflow with CHF discount curve that is adjusted with CHF/EUR currency basis curve and then convert the PV with current EUR/CHF fx-rate2. EUR-leg: use 3m forward curve and 3m discount curve for EUR floating leg. CHF-leg: convert CHF cashflows with EUR/CHF FX-forwards to Euros and then discount with EUR discount curve.Am I right with these alternatives? And which method is mostly used in practice?Br,Jack