Cross-Currency Swap Pricer

Understand cross-currency swaps and use BlueGamma's pricer to calculate implied spreads across currencies and tenors.

What Is a Cross-Currency Swap?

A cross-currency swap (XCCY swap) is a derivative contract where two parties exchange principal and interest payments in different currencies. Unlike a standard interest rate swap (same currency on both legs), a cross-currency swap involves:

• Initial exchange of principal at the spot FX rate
• Periodic interest payments in each respective currency
• Final re-exchange of principal at the original spot rate (not the prevailing rate at maturity)

Structure of a cross-currency swap: principal exchanged at start and maturity, with periodic interest payments in each currency

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How Cross-Currency Swaps Work

Example: EUR/USD Cross-Currency Swap

Imagine a European company that has issued USD-denominated bonds but earns revenue in EUR. They want to hedge their FX exposure.

At Inception
Company receives	$100 million (from bond investors)
Company pays	€90 million (to swap counterparty at spot rate of 1.11)

During the Swap
Company pays	EUR floating rate (e.g., EURIBOR) on €90m notional
Company receives	USD floating rate (e.g., SOFR) on $100m notional

At Maturity
Company pays	$100 million (to swap counterparty)
Company receives	€90 million (from swap counterparty)

The company has effectively converted their USD debt into EUR debt, matching their revenue currency.

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The Cross-Currency Basis

The cross-currency basis is the spread added to one leg of a cross-currency swap to make it fair value. It reflects:

• Supply and demand for funding in each currency
• Credit and counterparty risk differences
• Regulatory and balance sheet constraints on banks

A negative EUR/USD basis (common historically) means EUR borrowers pay a premium to swap into USD — reflecting higher demand for USD funding.

💡 Why it matters: The basis can add or reduce 20-50+ bps to your effective funding cost, making it critical for pricing cross-currency debt.

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BlueGamma's Pricing Methodology

BlueGamma's cross-currency swap pricer uses institutional-grade methodology:

Step	Description
1. Discount Curves	OIS-based curves for each currency (SOFR, ESTR, SONIA)
2. Basis Adjustment	Cross-currency basis spreads applied to align discount factors
3. FX Alignment	Cash flows converted at spot or agreed forward rates
4. Cash Flow Projection	Interest and principal flows scheduled per market conventions
5. NPV Calculation	Each leg discounted to present value; fair spread calculated

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Using the Cross-Currency Swap Pricer

Before You Start

To use the pricer, you need:

• A BlueGamma account (trial or subscription)
• Logged in at app.bluegamma.io

Don't have an account? Create a free BlueGamma trial

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Step 1: Navigate to the Pricer

From the sidebar, under Pricers, click Cross Currency Swap.

Cross Currency Swap pricer overview

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Step 2: Select Your Currencies

Use the dropdowns at the top:

Field	Description
Base Currency	The currency you're funding in (e.g., EUR)
Quote Currency	The currency you're swapping into (e.g., USD)

Supported pairs: EUR/USD, GBP/USD, EUR/GBP

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Step 3: Choose Your Tenors

The pricing matrix lets you compare multiple tenors side by side:

• Click + Add Tenor to add individual tenors (e.g., 7Y, 10Y, 12Y, 15Y)
• Click All to add all available tenors
• Click Clear to remove all and start fresh
• Click × next to any tenor to remove it

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Step 4: Enter Your Spread

For each tenor, enter your Input: Spread (bps) — the spread over the base currency benchmark.

The matrix automatically displays:

Row	Description
EUR Benchmark (%)	The benchmark swap rate for the base currency
Input: Spread (bps)	Your input spread over the benchmark
EUR Coupon (%)	The all-in coupon (benchmark + spread)
USD Coupon (%)	The equivalent coupon in the quote currency
USD Benchmark (bps)	The benchmark spread for the quote currency
Output: Implied Spread	The implied spread in USD based on your input
Spread Delta (bps)	Difference between input and implied spread

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Step 5: Analyse the Results

Spread vs Tenor Analysis: see how the basis affects pricing at different maturities

The Spread vs Tenor Analysis chart shows:

• Differential (green bars): The spread delta at each tenor
• EUR (dark blue line): Your input spread across tenors
• USD (light blue line): The implied USD spread

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Step 6: View Historical Spreads

Historical analysis: is the current basis attractive vs recent history?

The Historical USD Implied Spread section shows how implied spreads have moved over time. Configure:

• Base and Quote Currency
• Tenor (e.g., 10 years)
• EUR Spread to Benchmark (bps)

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Step 7: Download Your Data

Click Download on the pricing matrix or historical chart to export to CSV.

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Use Cases

Who	Use Case
Corporate treasurers	Compare funding costs across currencies
DCM teams	Price cross-currency bond issuance
Investment managers	Evaluate currency-hedged returns
Risk managers	Monitor cross-currency basis exposure

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Key Applications

• Foreign Currency Debt Hedging: Convert overseas funding back to home currency rates
• Balance Sheet Management: Align multi-currency assets and liabilities
• Risk Mitigation: Lock in exchange rates and interest costs

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Ready to price cross-currency swaps?

Create a free BlueGamma trial and start using the pricer today.

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