# Cross-Currency Swap Pricer ## 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)
Cross-currency swap structure diagram

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

*** ## 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. *** ## 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. *** ## 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 | *** ## 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](https://app.bluegamma.io) Don't have an account? [Create a free BlueGamma trial](https://auth.bluegamma.io/sign-up) *** ### Step 1: Navigate to the Pricer From the sidebar, under **Pricers**, click **Cross Currency Swap**.
Cross Currency Swap pricer interface

Cross Currency Swap pricer overview

*** ### 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 *** ### 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 *** ### 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 | *** ### Step 5: Analyse the Results
Spread vs Tenor Analysis chart

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 *** ### Step 6: View Historical Spreads
Historical USD Implied Spread chart

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) *** ### Step 7: Download Your Data Click **Download** on the pricing matrix or historical chart to export to CSV. *** ## 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 | *** ## 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 *** **Ready to price cross-currency swaps?** [Create a free BlueGamma trial](https://auth.bluegamma.io/sign-up) and start using the pricer today. *** **Need help?**\ 📩 | 📅 [Book a call](https://app.lemcal.com/@alivohra/website-demo?back=1) --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://bluegamma.io/documentation/pricers/overview.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.