Hi,say I trade AUDCAD and I hold the Position for a while. I am domiciled in EUR region and I need to pay (depending on rate differential I may also receive) some type of daily financing for this position to my broker. He calls this Swap Points. In AUDCAD the current Swap Rate is 2 / -7 and it is expressed in EUR (my home currency). Can somebody explain me how I calculate the fair Value of Swap Points? Is it (overnight rate of the long currency - overnight rate of the short currency) transferred into EUR?Thank you in advance

Hi,I see that nobody answered u for a week almost, so i will give it a try...So Swap Points are basically the difference between the outright fwd and the refrence rate (so 1m swap pts are basically the diff. between the 1m outright fwd and spot rate). when you roll the position overnight (from Tom to Spot) you pay (or receive the carry for holding the FX position opened). The calculation of the swap points is pretty straightforward:Let: S= SpotR(dom) = Domestic (term) Interest RateR(for) = Foreign (Base) Interest Ratet = days to SettlementDC = Day Count Convention (either 360 or 365, depends on the curreny convention)Swap Points = S*((1+R(dom)^(t/DC)/(1+R(for)^(t/DC)) - SNow, for AUDCAD it will give you something like -0.4 in term of AUD, however, because you are EUR denominated account you probably need to roll the residual CAD (or AUD, depends on what amount you swap, either term amount or base amount), so you also need to roll EURCAD (or EURAUD) to have all amounts settled to EUR.Hope that helps a bit

Hi Volmaster,thank you very much. This has helped indeed.Kind regards

QuoteOriginally posted by: royalflushCan somebody explain me how I calculate the fair Value of Swap Points? Actually, it is my understanding that you can't. For you to be able to calculate the fair value of fx swap, you will need a very liquid market in short term xccy basis swaps.That market does not exist -> it is the fx swap market itself. So what you're asking is basically how to calculate spot EUR/USD imho.

QuoteOriginally posted by: giladrQuoteOriginally posted by: royalflushCan somebody explain me how I calculate the fair Value of Swap Points? Actually, it is my understanding that you can't. For you to be able to calculate the fair value of fx swap, you will need a very liquid market in short term xccy basis swaps.That market does not exist -> it is the fx swap market itself. So what you're asking is basically how to calculate spot EUR/USD imho.Giladr,It was simply asked as a question on how the formula to calculate fx swap points works (to my understanding), so don't get too philosophical and come up with a smart-a$$ answer such as the above.