cross currency swap valuation

Tristanw1987 · March 11th, 2014, 10:09 am

Hi everyone,I'm currently looking for commonly used models for pricing cross currency swaps, can any of you provide any good references on that? Many thanks

secret2 · March 12th, 2014, 3:15 am

Swap and Other DerivativesBut then cross currency swap valuation ultimately boils down to the building blocks of rates modeling * 2 + fx modeling. So you can mix and match your favorite models.

Tristanw1987 · March 12th, 2014, 9:19 pm

Thanks, secret2.Regarding the modelling of the two underlying rates, I've read two papers, one is by Boenkost & Schmit(2005) and the other by Fujii et al (2010). The common practice seems to be that one chooses the dynamics for the base currency discounting rate, from which they obtain the base currency forward rates, and then bootstrap the foreign currency discount factors and forward rates. Is this what you refer by rates modelling *2?

trdrisk · March 26th, 2014, 10:47 pm

keep in your mind that there may be basis so that you dıscountıng curve should ınclude basıs spread