Download - Ch 9 Cross Currency
-
7/25/2019 Ch 9 Cross Currency
1/107
Worksheet Title
9.1 USD market data
9.2 Yen market data
9.3 Worksheet to estimate Yen-USD forward rates
9.4 Example of priin! a ross-"rren# $asis swa
9.% Deri&in! D'(s from a !eneri swap "r&e pl"s
9.+ )reatin! a s#ntheti forei!n asset, Swappin! a
9. Swappin! a S $ond into USD /i$or9.0 riin! a % #ear Yen-USD diff swap
9.9 riin! a % #ear Yen-USD "anto diff swap
9.1 riin! a USD-Yen /'5, anal#sin! the USD l
9.11 riin! a USD-Yen /'5, anal#sin! the USD l
9.12 riin! a USD-Yen /'5
9.13 8al"ation of a ))*S - sim"lation remo&ed
9.14 8al"ation of a ))*S with sim"lation
9.1% )orrelation matrix - "sed in the Sim"lation
9.1+ e$alanin! the 8al"ation of a ))*S with :er
9.1 e$alanin! the 8al"ation of a ))*S with :er
9.10 e$alanin! the 8al"ation of a ))*S with mar
9.19 e$alanin! the 8al"ation of a ))*S with mar
9.2 e$alanin! the 8al"ation of a ))*S with mar
9.21 e$alanin! the 8al"ation of a ))*S with mar
9.22 Swappin! a re&erse d"al "rren#
-
7/25/2019 Ch 9 Cross Currency
2/107
))*S "r&e
SD $ond into floatin! Yen
e! 617
e! 627
mar!in off "nad;"sted "r&es - sim"lation remo&ed
mar!in off "nad;"sted "r&es - "sin! sim"lation
in off "nad;"sted "r&es - sim"lation remo&ed
in off "nad;"sted "r&es - "sin! sim"lation
in off ad;"sted "r&es - sim"lation remo&ed
in off ad;"sted "r&es - "sin! sim"lation
into floatin! USD
atin! USD, al"latin! the $reake&en o"pon rate
)on&exit# - pproah 1
)on&exit# - pproah 2
-
7/25/2019 Ch 9 Cross Currency
3/107
9.1: USD market data
Today's date: 4-'e$-0
Settlement 2
ime =- !radient
rates
. 3.21+> .
.19 3.21+> -.+4
.01 3.1> -.2+
.2% 3.133> -.23
.%+ 3.3> -.4+
.+1 2.9%%> -.4
1.1 2.0%4> -.2
1.2+4 2.0> -.1+
1.%19 2.40> -.4
1.% 2.3> .
2.3+ 2.%%> .10
2.20 2.90> .24
2.%33 2.0+> .2+
2.94 2.929> .2+
3.4 2.99%> .2%
3.292 3.%> .24
3.%%3 3.12> .24
3.0+ 3.10> .23
4.%0 3.239> .23
4.311 3.290> .23
4.%+4 3.3%> .23
4.019 3.41> .23
%.% 3.4%> .23
%.322 3.%31> .22
%.%0 3.%00> .21
%.033 3.+43> .2
+.09 3.+9%> .19
+.33+ 3.42> .10
+.%92 3.09> .1+.04 3.033> .1+
.13 3.0%> .1%
.3% 3.913> .1%
.++ 3.9%1> .14
.0+1 3.90> .14
0.122 4.2%> .14
0.3+ 4.+> .14
0.+20 4.90> .14
0.001 4.133> .14
9.133 4.1+> .13
9.30+ 4.2> .12
9.+39 4.231> .12
9.092 4.2+1> .11
1.14 4.29> .11
1.39 4.31> .1
1.+% 4.343> .1
1.9+ 4.3+0> .1
11.1+1 4.393> .9
11.40 4.41+> .9
11.++4 4.439> .9
11.919 4.4+1> .0
12.1% 4.403> .0
12.42% 4.%3> .0
12.+01 4.%24> .0
12.93+ 4.%44> .0
13.19 4.%+4> .
13.439 4.%02> .
13.+94 4.+> .
-
7/25/2019 Ch 9 Cross Currency
4/107
9.2: Yen market data
Today's date: 4-'e$-0
Settlement
Spot rate 1+.+1
=-) rates =-) rates
ime Unad;"sted !radient d;"sted !radien
. .%0%> .
.19 .%0%> .94
.01 .+42> .132
.2%3 .0> .19 .2% .0+9>
.%+ .910> .23 .%+ .921>
.+1 .9+> .+ .+1 .90>
1.1 .991> -.1% 1.1 .99+>
1.2+4 .9%%> -.10 1.2+4 .9+2>
1.%19 .90> -.1% 1.%19 .910>
1.% .01> -. 1.% .004>
2.31 .0%3> .2 2.3+ .0+9>
2.20 .0%9> .0 2.20 .0>
2.%33 .00> .1 2.%33 .9>
2.09 .9%> .11 2.94 .929>3.44 .933> .11 3.4 .9%9>
3.292 .9+> .1 3.292 .90>
3.%4 .90+> .1 3.%%3 1.1+>
3.03 1.1> .9 3.0+ 1.43>
4.+4 1.34> .9 4.%0 1.+9>
4.30 1.%%> .9 4.311 1.94>
4.%+9 1.0> .9 4.%+4 1.110>
4.022 1.11> .1 4.019 1.144>
%.% 1.12+> .11 %.% 1.11>
%.320 1.1%3> .11 %.322 1.2>%.%01 1.101> .11 %.%0 1.23>
%.033 1.21> .11 %.033 1.2+1>
+.09 1.230> .11 +.09 1.29>
+.339 1.2+%> .1 +.33+ 1.31>
+.%92 1.29> .1 +.%92 1.344>
+.04 1.31+> .1 +.04 1.31>
.13 1.341> .1 .13 1.39>
-
7/25/2019 Ch 9 Cross Currency
5/107
.3% 1.3++> .1 .3% 1.422>
.++ 1.392> .1 .++ 1.440>
.0+1 1.410> .11 .0+1 1.4%>
0.11 1.44%> .11 0.122 1.%4>
0.3+ 1.43> .11 0.3+ 1.%32>
0.+22 1.%2> .11 0.+20 1.%+2>
0.00 1.%32> .11 0.001 1.%92>9.139 1.%+1> .11 9.133 1.+21>
9.301 1.%00> .11 9.30+ 1.+%>
9.+3+ 1.+1%> .1 9.+39 1.+0>
9.09 1.+42> .1 9.092 1.4>
1.1% 1.++> .9 1.14 1.3>
1.394 1.+91> .9 1.39 1.%%>
1.+%+ 1.14> .9 1.+% 1.0>
1.90 1.3> .0 1.9+ 1.01>
11.1+1 1.%0> .0 11.1+1 1.023>
11.414 1.9> .0 11.40 1.043>
11.++ 1.99> .0 11.++4 1.0+4>
11.919 1.02> .0 11.919 1.00%>
12.1% 1.04> .0 12.1% 1.9%>
12.42% 1.0%9> .0 12.42% 1.924>
12.+01 1.09> .0 12.+01 1.944>
12.93+ 1.099> .0 12.93+ 1.9+3>
13.192 1.919> .0 13.19 1.903>
13.439 1.93> . 13.439 2.1>
13.+94 1.9%+> . 13.+94 2.19>13.9% 1.9%> . 13.9%+ 2.30>
14.2+ 1.993> . 14.20 2.%%>
14.4%3 2.1> . 14.4%3 2.2>
14.0 2.2> . 14.14 2.09>
14.9+4 2.44> .+ 14.9+ 2.1%>
1%.22% 2.+1> .+ 1%.219 2.121>
1%.4+ 2.+> .+ 1%.42 2.13+>
1%.22 2.92> .+ 1%.2% 2.1%1>
1%.903 2.1> .+ 1%.90 2.1+%>
1+.23+ 2.122> .+ 1+.233 2.19>1+.409 2.13+> .% 1+.403 2.193>
1+.42 2.1%> .% 1+.39 2.2+>
1+.994 2.1+3> .% 1+.994 2.22>
1.2% 2.1+> .% 1.2% 2.232>
1.% 2.109> .% 1.49 2.24%>
1.%3 2.22> .% 1.%3 2.2%>
10.0 2.214> .% 10.0 2.2+9>
-
7/25/2019 Ch 9 Cross Currency
6/107
10.2+4 2.22+> .% 10.2+4 2.201>
10.%11 2.23> .% 10.%11 2.292>
10.+ 2.249> .4 10.+ 2.33>
19.22 2.2+> .4 19.22 2.31%>
19.20 2.21> .4 19.203 2.32+>
19.%2% 2.202> .4 19.%2% 2.33+>
19.01 2.293> .4 19.01 2.34+>2.3+ 2.33> .4 2.42 2.3%>
2.292 2.313> .4 2.294 2.3+>
2.%42 2.323> .4 2.%4 2.3>
2.9 2.333> .4 2.0 2.30>
21.%0 2.343> .4 21.%3 2.39+>
21.311 2.3%2> .4 21.30 2.4%>
21.%%+ 2.3+1> .4 21.%%0 2.414>
21.01 2.31> .4 21.011 2.423>
22.+9 2.39> .3 22.+ 2.432>
22.322 2.300> .3 22.322 2.441>
22.%% 2.39> .3 22.%+9 2.449>
22.020 2.4%> .3 22.02% 2.4%0>
23.01 2.413> .3 23.01 2.4++>
23.33+ 2.422> .3 23.33+ 2.44>
23.%0+ 2.429> .3 23.%03 2.401>
23.039 2.43> .3 23.039 2.409>
24.94 2.44%> .3 24.94 2.49>
24.3% 2.4%2> .3 24.3% 2.%4>
24.+ 2.4%9> .3 24.+ 2.%11>24.0%+ 2.4+> .3 24.0%+ 2.%10>
2%.111 2.44> .3 2%.11 2.%2%>
2%.3+ 2.401> .3 2%.3+9 2.%32>
2%.+14 2.40> .3 2%.+14 2.%30>
2%.0+9 2.494> .3 2%.0% 2.%4%>
2+.12% 2.%> .2 2+.120 2.%%1>
2+.30+ 2.%> .2 2+.301 2.%%>
2+.+20 2.%13> .2 2+.+33 2.%+3>
2+.003 2.%19> .2 2+.00+ 2.%+9>
2.144 2.%2%> .2 2.139 2.%4>2.39 2.%3> .2 2.394 2.%0>
2.+42 2.%3+> .2 2.+44 2.%0%>
2.93 2.%42> .2 2.09 2.%9>
20.1%+ 2.%4> .2 20.1%3 2.%9+>
20.40 2.%%2> .2 20.40 2.+1>
20.++1 2.%%> .2 20.+%0 2.++>
20.914 2.%+3> .2 20.914 2.+11>
-
7/25/2019 Ch 9 Cross Currency
7/107
29.1+9 2.%+0> .2 29.1+9 2.+1+>
29.42% 2.%3> .2 29.42% 2.+2>
29.+2 2.%> .2 29.+2 2.+2%>
29.920 2.%02> .2 29.920 2.+3>
3.103 2.%0> .2 3.103 2.+34>
3.439 2.%92> 3.444 2.+30>
-
7/25/2019 Ch 9 Cross Currency
8/107
Anterpolated Da# o"nt D's B
da# o"nt =-) rates tC3+%
4-'e$-0
+-'e$-0 .+ .%0%> .% .9999+0 .%492
+-"!-0 .%11 .919> .499 .99%313 .%124+
+-'e$-9 1.22 .99> .%4 .90992 1.043
+-"!-9 1.%2% .9> .49+ .90+2+1 1.40900131
0-'e$-1 2.42 .0%3> .%1 .90230 1.99+39
+-"!-1 2.%39 .09> .49 .9929 2.42+111
-'e$-11 3.%3 .934> .% .9100+ 2.9+20+91
0-"!-11 3.%%0 .90> .499 .9+%% 3.4442004+
+-'e$-12 4.+4 1.34> .499 .9%004 3.92239404
+-"!-12 4.%+9 1.0> .499 .9%1932 4.39%+91
+-'e$-13 %.01 1.12+> .%4 .94430 4.031314+
-
7/25/2019 Ch 9 Cross Currency
9/107
-
7/25/2019 Ch 9 Cross Currency
10/107
-
7/25/2019 Ch 9 Cross Currency
11/107
-
7/25/2019 Ch 9 Cross Currency
12/107
'orward
swaps
.930>
1.9>
.923>
.0+0>
.094>
.9%>
1.2>
1.%>
1.94>
1.142>
-
7/25/2019 Ch 9 Cross Currency
13/107
-
7/25/2019 Ch 9 Cross Currency
14/107
-
7/25/2019 Ch 9 Cross Currency
15/107
-
7/25/2019 Ch 9 Cross Currency
16/107
9.3: Worksheet to estimate Yen-USD forward rates
Today's date: -!e"-#$Settlement 2
Spot rate, 1+.+1
ffer-Y *id-Y mid-Y
+-'e$-0 tC3+
3 +-?a#-0 .2% .02> .4> .09>
+ +-"!-0 .%+ .921> .9+> .0%0>
12 +-'e$-9 1.1 .99%> .0> .933>
-
7/25/2019 Ch 9 Cross Currency
17/107
theoretial > han!e "oted
ffer-USD *id-USD mid-USD forwards in rate forwards
3.14%> 3.2> 3.03> 1%.9990 .%+> 1%.99
3.90> 2.93> 3.3%> 1%.44% 1.0> 1%.4+
2.09+> 2.1> 2.034> 14.%90+ 1.00> 14.%%
-
7/25/2019 Ch 9 Cross Currency
18/107
implied Skew
Yen rate 6$p7
.+0> -4.0%
.001+> 2.33
.09+> -4.24
-
7/25/2019 Ch 9 Cross Currency
19/107
9.: %&amle of ri(in) a (ross-(*rren(y "asis swa
Today's date: -!e"-#$
)"rrent spot rate F 1#+.+#1 Spread on ))*S # $p
3mo. 'orward skew 2 $p
'5 &olatilit# F 2,pa. $orrowin! mar!in 3 $p
ro$a$ilit# , depositin! mar!in -, $p
En&elope m"ltiplier F 1.1%
ss"me a prinipal of 1.## m USDYen prinipal 1+.+1 m Yen
exess
eriod Da# USD Yen Estimated 6Yen7 Da#
o"nt df(s df(s forward '5 en&elope ----------------G o"nt
rates .% "p .% down
H
I1J I2J I3J I4J I%J I+J
+-'e$-0 1 1 1+.+1 1+.+1 1+.+1 H
+-?a#-0 .2% .992199 .9903+ 1%.999 122.391 91.02 H - .2%
+-"!-0 .%+ .904%02 .99%3 1%.44+ 129.3 0%.94+ H 1%K9K+3 .2%+
+-@o&-0 .+1 .9% .992+1 1%. 134.9%2 01.+ H 22K+9K0 .2%+
+-'e$-9 1.1 .9139 .90993 14.+1 139.00 0.21 H 20K3%1K33 .2%+
+-?a#-9 1.2+4 .9+%303 .9002 14.1+1 143.910 %.30+ H 33K10+K+4 .24
+-"!-9 1.%19 .9%9112 .90+290 13.++3 14.+ 2.22 H 3K31K4%2 .2%+
+-@o&-9 1.% .9%2%0+ .904++4 13.120 1%1.29 .34 H 41K1++K33 .2%+
0-'e$-1 2.3+ .94%4%0 .9020 12.%%2 1%4.%04 +0.34 H 44K+K%+ .2+1
+-?a#-1 2.20 .930249 .90+32 11.994 1%.42% ++.01 H 4K902K%9 .242
+-"!-1 2.%33 .93114 .9991 11.302 1+.234 +4.14+ H %K023K%+1 .2%+
0-@o&-1 2.94 .921421 .9%14 1.41 1+2.920 +2.291 H %3K+33K29 .2+1
-'e$-11 3.4 .912+4 .919%4 1.19 1+%.30+ +.%9 H %+K32+K%+2 .2%3
otal F
Estimated 8 of 1 $p in Yen 6B7
E"i&alent mar!in F
-
7/25/2019 Ch 9 Cross Currency
20/107
arket data 9.,: Deri0in)
6ote: these d
Today's date: -!e"-#$
Settlement Unad;"sted=-) rates
Swa rates mid . .%0%>
))*S .19 .%0%>
Years 4-'e$-0 .01 .+42>
1 4-'e$-9 .% .2%3 .0>
2 4-'e$-1 1.+2% .%+ .910>
3 4-'e$-11 2.% .+1 .9+>
4 +-'e$-12 3.% 1.1 .991>
% 4-'e$-13 4.% 1.2+4 .9%%>+ 4-'e$-14 1.%19 .90>
4-'e$-1% %.% 1.% .01>
0 4-'e$-1+ 2.31 .0%3>
9 +-'e$-1 2.20 .0%9>
1 %-'e$-10 +.2% 2.%33 .00>
12 4-'e$-2 2.09 .9%>
1% +-'e$-23 +. 3.44 .933>
2 4-'e$-20 %.% 3.292 .9+>
2% 4-'e$-33 3.%4 .90+>3 4-'e$-30 %. 3.03 1.1>
4.+4 1.34>
a!ainst 3mo. USD /i$or 4.30 1.%%>
4.%+9 1.0>
4.022 1.11>
%.% 1.12+>
%.320 1.1%3>
%.%01 1.101>
%.033 1.21>
+.09 1.230>
+.339 1.2+%>
+.%92 1.29>
+.04 1.31+>
.13 1.341>
.3% 1.3++>
.++ 1.392>
.0+1 1.410>
0.11 1.44%>
-
7/25/2019 Ch 9 Cross Currency
21/107
0.00 1.%32>
9.139 1.%+1>
9.301 1.%00>
9.+3+ 1.+1%>
9.09 1.+42>1.1% 1.++>
1.394 1.+91>
1.+%+ 1.14>
1.90 1.3>
11.1+1 1.%0>
11.414 1.9>
11.++ 1.99>
11.919 1.02>
12.1% 1.04>
12.42% 1.0%9>12.+01 1.09>
12.93+ 1.099>
13.192 1.919>
13.439 1.93>
13.+94 1.9%+>
13.9% 1.9%>
14.2+ 1.993>
14.4%3 2.1>
14.0 2.2>14.9+4 2.44>
1%.22% 2.+1>
1%.4+ 2.+>
1%.22 2.92>
1%.903 2.1>
1+.23+ 2.122>
1+.409 2.13+>
1+.42 2.1%>
1+.994 2.1+3>
1.2% 2.1+>
1.% 2.109>
1.%3 2.22>
10.0 2.214>
10.2+4 2.22+>
10.%11 2.23>
10.+ 2.249>
19.22 2.2+>
19.20 2.21>
-
7/25/2019 Ch 9 Cross Currency
22/107
2.3+ 2.33>
2.292 2.313>
2.%42 2.323>
2.9 2.333>
21.%0 2.343>21.311 2.3%2>
21.%%+ 2.3+1>
21.01 2.31>
22.+9 2.39>
22.322 2.300>
22.%% 2.39>
22.020 2.4%>
23.01 2.413>
23.33+ 2.422>
23.%0+ 2.429>23.039 2.43>
24.94 2.44%>
24.3% 2.4%2>
24.+ 2.4%9>
24.0%+ 2.4+>
2%.111 2.44>
2%.3+ 2.401>
2%.+14 2.40>
2%.0+9 2.494>2+.12% 2.%>
2+.30+ 2.%>
2+.+20 2.%13>
2+.003 2.%19>
2.144 2.%2%>
2.39 2.%3>
2.+42 2.%3+>
2.93 2.%42>
20.1%+ 2.%4>
20.40 2.%%2>
20.++1 2.%%>
20.914 2.%+3>
29.1+9 2.%+0>
29.42% 2.%3>
29.+2 2.%>
29.920 2.%02>
3.103 2.%0>
3.439 2.%92>
-
7/25/2019 Ch 9 Cross Currency
23/107
!'s from a )eneri( swa (*r0e l*s a 445S (*r0e
tes are 2 days forward7 followin) the (on0ention in the 44S market
Spread o&erLradient ))*S 8al"ation 3mo. 'orwards Lradient
I1J I2J I3J
. # .904
.9 1 .% . #.9$ 3.119 .2%
.13 2 1.+2% . 3.9#9 .+4 .%
.2 3 2.% . .,1# 3.312% .%
.2 4 3.% . .$22 1.201% 1.
.1 % 4.% . 9.1# -.0%9 1.2%
-.1 %.% . .3$$ .499 1.%
-.2 1 +.2% . $.$+1 -1.340% 1.%-.1 1% +. . 2.11$ .%40 2.
-.1 2 %.% . .$, -.2939 2.2%
. 3 %. . 1.91$ 2.%
.1 2.%
.1 3.
.1 3.2%
.1 3.%
.1 3.%
.1 4..1 4.2%
.1 4.%
.1 4.%
.1 %.
.1 %.2%
.1 %.%
.1 %.%
.1 +.
.1 +.2%
.1 +.%
.1 +.%
.1 .
.1 .2%
.1 .%
.1 .%
.1 0.
.1 0.2%
.1 0.%
-
7/25/2019 Ch 9 Cross Currency
24/107
.1 9.2%
.1 9.%
.1 9.%
.1 1.
.1 1.2%.1 1.%
.1 1.%
.1 11.
.1 11.2%
.1 11.%
.1 11.%
.1 12.
.1 12.2%
.1 12.%
.1 12.%.1 13.
.1 13.2%
.1 13.%
.1 13.%
.1 14.
.1 14.2%
.1 14.%
.1 14.%
.1 1%..1 1%.2%
.1 1%.%
.1 1%.%
.1 1+.
.1 1+.2%
.1 1+.%
.1 1+.%
.1 1.
.1 1.2%
.1 1.%
. 1.%
. 10.
. 10.2%
. 10.%
. 10.%
. 19.
. 19.2%
. 19.%
-
7/25/2019 Ch 9 Cross Currency
25/107
. 2.2%
. 2.%
. 2.%
. 21.
. 21.2%. 21.%
. 21.%
. 22.
. 22.2%
. 22.%
. 22.%
. 23.
. 23.2%
. 23.%
. 23.%. 24.
. 24.2%
. 24.%
. 24.%
. 2%.
. 2%.2%
. 2%.%
. 2%.%
. 2+.. 2+.2%
. 2+.%
. 2+.%
. 2.
. 2.2%
. 2.%
. 2.%
. 20.
. 20.2%
. 20.%
. 20.%
. 29.
. 29.2%
. 29.%
. 29.%
. 3.
.
-
7/25/2019 Ch 9 Cross Currency
26/107
'orward da#s Anterpolated Unad;"sted da#s 3mo. 'orwards ))*Sdates tC3+ =-) rates D's tC3+ "nad;"sted spreads
I4J I%J I+J
+-'e$-0 1
+-?a#-0 .2% .0+> .9903+ .2% .0++>
+-"!-0 .%+ .910> .99%3 .2%+ .9+92>
+-@o&-0 .+1 .9+> .992+1 .2%+ 1.919>
+-'e$-9 1.1 .991> .90993 .2%+ 1.30+> .%
+-?a#-9 1.2+4 .9%%> .9002 .24 .0+0>
+-"!-9 1.%19 .90> .90+290 .2%+ .++>
+-@o&-9 1.% .01> .904++4 .2%+ .+49>0-'e$-1 2.3+ .0%3> .9020 .2+1 .312> 1.+2%
+-?a#-1 2.20 .0%9> .90+32 .242 .994>
+-"!-1 2.%33 .00> .9991 .2%+ 1.%++>
0-@o&-1 2.94 .9%> .9%14 .2+1 1.1+9%>
-'e$-11 3.4 .934> .919%4 .2%3 1.24%%> 2.%
+-?a#-11 3.292 .9+> .9+090 .244 1.20+1>
0-"!-11 3.%%3 .90+> .9+%%2 .2+1 1.3233>
-@o&-11 3.0+ 1.11> .9+222 .2%3 1.3%+>
+-'e$-12 4.%0 1.34> .9%091% .2%3 1.3049> 3.%-?a#-12 4.311 1.%+> .9%%%0 .2%3 1.41%>
+-"!-12 4.%+4 1.0> .9%21 .2%3 1.4%3%>
+-@o&-12 4.019 1.11> .94033% .2%+ 1.%1+2>
+-'e$-13 %.% 1.12+> .9444% .2%+ 1.%99%> 4.%
+-?a#-13 %.322 1.1%2> .94%19 .24 1.14>
+-"!-13 %.%0 1.101> .93+2%3 .2%+ 1.020>
+-@o&-13 %.033 1.21> .9310%+ .2%+ 1.04+3>
+-'e$-14 +.09 1.230> .9230 .2%+ 1.0094>
+-?a#-14 +.33+ 1.2+4> .9231% .24 1.912>
+-"!-14 +.%92 1.29> .9104%+ .2%+ 1.9424>
+-@o&-14 +.04 1.31+> .913033 .2%+ 1.99>
+-'e$-1% .13 1.341> .9913 .2%+ 2.242> %.%
+-?a#-1% .3% 1.3++> .94400 .24 2.+>
+-"!-1% .++ 1.392> .099%3 .2%+ 2.130>
+-@o&-1% .0+1 1.410> .094%21 .2%+ 2.211>
0-'e$-1+ 0.122 1.44+> .009194 .2+1 2.2942>
+-?a#-1+ 0.3+ 1.43> .00430 .244 2.30+>
0-"!-1+ 0.+20 1.%3> .0030% .2+1 2.4+4+>
-
7/25/2019 Ch 9 Cross Currency
27/107
0-?a#-1 9.30+ 1.%00> .0+149 .2%3 2.+3>
-"!-1 9.+39 1.+1+> .0%%94 .2%3 2.+32>
+-@o&-1 9.092 1.+42> .0%11 .2%3 2.+493>
+-'e$-10 1.14 1.++> .0443+2 .2%+ 2.+%90> +.2%
-?a#-10 1.39 1.+91> .0300 .2% 2.++21>+-"!-10 1.+% 1.14> .0331+2 .2%3 2.++%>
+-@o&-10 1.9+ 1.3+> .0249 .2%+ 2.+0+>
+-'e$-19 11.1+1 1.%0> .021041 .2%+ 2.+932>
+-?a#-19 11.40 1.0> .01+3 .24 2.19>
+-"!-19 11.++4 1.99> .01% .2%+ 2.341>
+-@o&-19 11.919 1.02> .0%2% .2%+ 2.+1>
+-'e$-2 12.1% 1.04> .99322 .2%+ 2.91>
+-?a#-2 12.42% 1.0%9> .9314 .2% 2.02++>
+-"!-2 12.+01 1.09> .09% .2%+ 2.0%00>
+-@o&-2 12.93+ 1.099> .02103 .2%+ 2.0003>0-'e$-21 13.19 1.919> .+24 .2+1 2.91%%>
+-?a#-21 13.439 1.93> .90 .242 2.939+>
+-"!-21 13.+94 1.9%+> .+%9 .2%+ 2.9+11>
0-@o&-21 13.9%+ 1.9%> .%912 .2+1 2.903>
-'e$-22 14.20 1.993> .%339% .2%3 2.99+9>
+-?a#-22 14.4%3 2.1> .4091 .244 3.1+>
0-"!-22 14.14 2.20> .423% .2+1 3.221>
-@o&-22 14.9+ 2.44> .3+393 .2%3 3.311>
+-'e$-23 1%.219 2.+1> .303 .2%3 3.3+9> +.0-?a#-23 1%.42 2.> .2%2 .2%3 3.410>
-"!-23 1%.2% 2.92> .19++ .2%3 3.4%3>
+-@o&-23 1%.90 2.1> .141+3 .2%3 3.40+>
+-'e$-24 1+.233 2.122> .0+34 .2%+ 3.%3%>
+-?a#-24 1+.403 2.13+> .32%9 .2% 3.%1>
+-"!-24 1+.39 2.1%> .+999 .2%+ 3.+10>
+-@o&-24 1+.994 2.1+3> .+9234 .2%+ 3.++>
+-'e$-2% 1.2% 2.1+> .+0+904 .2%+ 3.1>
+-?a#-2% 1.49 2.109> .+0102 .24 3.42>
+-"!-2% 1.%3 2.22> .++49 .2%+ 3.91>
+-@o&-2% 10.0 2.214> .+119 .2%+ 3.034>
+-'e$-2+ 10.2+4 2.22+> .++%93% .2%+ 3.00>
+-?a#-2+ 10.%11 2.23> .++002 .24 3.92>
+-"!-2+ 10.+ 2.249> .+%%+92 .2%+ 3.94>
+-@o&-2+ 19.22 2.2+> .+%%34 .2%+ 3.123>
0-'e$-2 19.203 2.22> .+4%290 .2+1 3.1%>
+-?a#-2 19.%2% 2.202> .+4401 .242 3.1124>
+-"!-2 19.01 2.293> .+3%410 .2%+ 3.11>
-
7/25/2019 Ch 9 Cross Currency
28/107
0-?a#-20 2.%4 2.323> .+241 .2%3 3.1344>
-"!-20 2.0 2.333> .+1%%32 .2%3 3.139+>
+-@o&-20 21.%3 2.343> .+1+9 .2%3 3.1439>
+-'e$-29 21.30 2.3%2> .+%04 .2%+ 3.1491>
-?a#-29 21.%%0 2.3+1> .+1+% .2% 3.1%33>+-"!-29 21.011 2.3> .%9+30 .2%3 3.1%+3>
+-@o&-29 22.+ 2.39> .%91%3 .2%+ 3.1+3>
+-'e$-3 22.322 2.300> .%0+0 .2%+ 3.1+33>
+-?a#-3 22.%+9 2.39> .%02231 .24 3.1+%2>
+-"!-3 22.02% 2.4%> .%%%% .2%+ 3.1+01>
+-@o&-3 23.01 2.413> .%2914 .2%+ 3.1+99>
+-'e$-31 23.33+ 2.422> .%+030 .2%+ 3.112>
+-?a#-31 23.%03 2.429> .%+300+ .24 3.12>
+-"!-31 23.039 2.43> .%%93% .2%+ 3.132>
+-@o&-31 24.94 2.44%> .%%40% .2%+ 3.134>+-'e$-32 24.3% 2.4%2> .%%30 .2%+ 3.13%>
+-?a#-32 24.+ 2.4%9> .%4+%% .2% 3.132>
+-"!-32 24.0%+ 2.4+> .%41++3 .2%+ 3.12+>
0-@o&-32 2%.11 2.44> .%3214 .2+1 3.119>
-'e$-33 2%.3+9 2.401> .%32943 .2%3 3.1%>
+-?a#-33 2%.+14 2.40> .%2004+ .244 3.1+9>
0-"!-33 2%.0% 2.494> .%24%0 .2+1 3.1++>
-@o&-33 2+.120 2.%> .%2343 .2%3 3.1++1>
+-'e$-34 2+.301 2.%> .%1+214 .2%3 3.1+43>0-?a#-34 2+.+33 2.%13> .%12110 .2%3 3.1+4>
-"!-34 2+.00+ 2.%19> .%0% .2%3 3.1+22>
+-@o&-34 2.139 2.%24> .%43 .2%3 3.1+>
+-'e$-3% 2.394 2.%3> .499992 .2%+ 3.1+3>
-?a#-3% 2.+44 2.%3+> .49+4 .2% 3.1%93>
+-"!-3% 2.09 2.%41> .49214+ .2%3 3.1%>
+-@o&-3% 20.1%3 2.%4> .4002+ .2%+ 3.1%+>
+-'e$-3+ 20.40 2.%%2> .404299 .2%+ 3.1%+0>
+-?a#-3+ 20.+%0 2.%%> .40%0 .2% 3.1%%0>
+-"!-3+ 20.914 2.%+3> .4+++4 .2%+ 3.1%%+>
+-@o&-3+ 29.1+9 2.%+0> .420%2 .2%+ 3.1%%>
+-'e$-3 29.42% 2.%3> .4+9 .2%+ 3.1%4+>
+-?a#-3 29.+2 2.%> .4+%441 .24 3.1%43>
+-"!-3 29.920 2.%02> .4+119 .2%+ 3.1%4>
+-@o&-3 3.103 2.%0> .4%020 .2%+ 3.1%39>
0-'e$-30 3.444 2.%92> .4%43 .2+1 3.1423> %.
-
7/25/2019 Ch 9 Cross Currency
29/107
Spread to @ew Yen &al"ation of smoothin!
3mo. 'orward 3mo. 'orward D'(s ))*S onstraint"r&e "r&e ad;"sted 2.%1
IJ I0J I9J I1J I11J
1
.2 .0+9+> .99031
.399 .932> .99%3%% .1
.%99 1.99> .992%1 .2
.90 1.4++> .909923 . .
1.%+ .022+> .90914 .%
2.3%4 .+99+> .90+1%1 .2
3.132 .+01> .90443 .3.99 .3> .9024+2 - . .1
4.%9 .9499> .90211 .3
4.21 1.90> .94+ .2
4.3+ 1.213> .9430 .1
4.%1 1.29+> .91212 - . .1
%.330 1.339%> .9+042 .
+.1++ 1.3049> .9+4%%4 .
+.994 1.42+> .9+100 .
.022 1.4+31> .9%%4 - . .0.143 1.4919> .9%3949 .
0.4+3 1.%301> .9%2%% .
0.03 1.+41> .94+3% .
9.14 1.+9%> .94234 - . .1
0.009 1.93> .9301%2 .1
0.+% 1.0+9%> .933+91 .1
0.4+ 1.939> .9291+ .
0.24+ 1.919> .924440 .
0.31 1.9923> .91991 .
.01 2.2+> .91%191 .
.+2 2.%%> .9140 .
.300 2.901> .9%%%3 - . .
.%11 2.1%11> .9+2 .
.+33 2.2142> .09%+94 .
.%+ 2.20> .09400 .1
.09 2.33> .00%4 .1
0.2 2.4++1> .091 .1
0.124 2.%4%0> .03092 .1
-
7/25/2019 Ch 9 Cross Currency
30/107
0.492 2.+922> .0%+%43 .
0.+1% 2.109> .0%+9+ .
0.30 2.3+> .0440%2 .
0.0+1 2.404> .0309%9 - . .
0.%23 2.43> .03323+ .0.10+ 2.493> .0240% .
.049 2.%1> .021+9+ .
.%12 2.+03> .01%924 .
.1% 2.02> .01349 .
+.030 2.02%> .04%0 .
+.%1 2.02+> .9001 .
+.1+4 2.0%34> .933% .
%.02+ 2.0040> .03%+ .
%.409 2.913> .01%3 .
%.1%2 2.9390> .%9 .4.01% 2.9+3> .+9%2 .
4.40 2.9043> .+424 .
4.141 3.2%> .%0421 .
3.04 3.104> .%249 .
3.4++ 3.31%> .4++0 .
3.129 3.419> .412%+ .
2.92 3.%1> .3%399 .
2.4%% 3.%%> .29+3 .
2.110 3.%0> .241+% - . .2.2%% 3.+44> .10%90 .
2.392 3.+92> .13++ .
2.%29 3.39> .%+0 .
2.+++ 3.01> .242 .
2.03 3.0%1> .+9+++9 .
2.94 3.912> .+9129 .
3. 3.9+0> .+0%01 .
3.214 3.122> .+030 .
3.3%1 3.1> .+%2 .
3.40 3.114> .++90+9 .
3.+24 3.119+> .++4%1 .
3.+1 3.12%+> .+%93% .
3.090 3.131> .+%4239 .
4.3% 3.130> .+493% .
4.12 3.144> .+430+2 .
4.39 3.1%+> .+30+0 .
4.44+ 3.1%+9> .+333 .
4.%03 3.1+3%> .+20+9 .
-
7/25/2019 Ch 9 Cross Currency
31/107
4.04 3.1022> .+13+2% .
4.1 3.10+> .+021 .
4.+3 3.193> .+30%2 .
4.%+3 3.194> .%909+2 .
4.49 3.1902> .%9421 .4.41+ 3.2%> .%09442 .
4.343 3.230> .%04+%% .
4.2+9 3.2+> .%994 .
4.19+ 3.22> .%%342 .
4.122 3.293> .%++2 .
4.49 3.214> .%++10 .
3.9% 3.219> .%+1411 .
3.92 3.2111> .%%+909 .
3.020 3.211%> .%%24%% .
3.%% 3.219> .%49%9 .3.+01 3.213> .%43% .
3.+0 3.293> .%3914 .
3.%34 3.20> .%349 .
3.4+1 3.2+%> .%3349 .
3.30 3.243> .%2+00 .
3.314 3.221> .%222 .
3.24 3.2> .%1+ .
3.1+ 3.19> .%13%2+ .
3.93 3.19%2> .%9411 .3.2 3.1942> .%%331 .
2.94+ 3.191> .%120 .
2.03 3.1094> .4920 .
2.99 3.1003> .4932%9 .
2.2+ 3.10++> .4093+ .
2.+%3 3.1042> .40%4%3 .
2.%9 3.1034> .401%3% .
2.%+ 3.1019> .4+%1 .
2.432 3.101> .43004 .
2.3%9 3.192> .4+% .
2.20% 3.10> .4++20 .
2.212 3.1+> .4+2%23 .
2.130 3.1%+> .4%092 .
2.+% 3.14> .4%%22 .
1.991 3.130> .4%1%+4 .
1.910 3.1+1%> .440+ - . .
-
7/25/2019 Ch 9 Cross Currency
32/107
=-) ratesd;"sted
.
.2% .0+9>
.%+ .921>
.+1 .90>
1.1 .99+>
1.2+4 .9+2>1.%19 .910>
1.% .004>
2.3+ .0+9>
2.20 .0>
2.%33 .9>
2.94 .929>
3.4 .9%9>
3.292 .90>
3.%%3 1.1+>3.0+ 1.43>
4.%0 1.+9>
4.311 1.94>
4.%+4 1.110>
4.019 1.144>
%.% 1.11>
%.322 1.2>
%.%0 1.23>
%.033 1.2+1>
+.09 1.29>
+.33+ 1.31>
+.%92 1.344>
+.04 1.31>
.13 1.39>
.3% 1.422>
.++ 1.440>
.0+1 1.4%>
0.122 1.%4>
0.000 5.000 10.
0.0000%
0.5000%
1.0000%
1.5000%
2.0000%
2.5000%
3.0000%
3.5000%
Forwa
-
7/25/2019 Ch 9 Cross Currency
33/107
0.001 1.%92>
9.133 1.+21>
9.30+ 1.+%>
9.+39 1.+0>
9.092 1.4>1.14 1.3>
1.39 1.%%>
1.+% 1.0>
1.9+ 1.01>
11.1+1 1.023>
11.40 1.043>
11.++4 1.0+4>
11.919 1.00%>
12.1% 1.9%>
12.42% 1.924>12.+01 1.944>
12.93+ 1.9+3>
13.19 1.903>
13.439 2.1>
13.+94 2.19>
13.9%+ 2.30>
14.20 2.%%>
14.4%3 2.2>
14.14 2.09>14.9+ 2.1%>
1%.219 2.121>
1%.42 2.13+>
1%.2% 2.1%1>
1%.90 2.1+%>
1+.233 2.19>
1+.403 2.193>
1+.39 2.2+>
1+.994 2.22>
1.2% 2.232>
1.49 2.24%>
1.%3 2.2%>
10.0 2.2+9>
10.2+4 2.201>
10.%11 2.292>
10.+ 2.33>
19.22 2.31%>
19.203 2.32+>
-
7/25/2019 Ch 9 Cross Currency
34/107
2.42 2.3%>
2.294 2.3+>
2.%4 2.3>
2.0 2.30>
21.%3 2.39+>21.30 2.4%>
21.%%0 2.414>
21.011 2.423>
22.+ 2.432>
22.322 2.441>
22.%+9 2.449>
22.02% 2.4%0>
23.01 2.4++>
23.33+ 2.44>
23.%03 2.401>23.039 2.409>
24.94 2.49>
24.3% 2.%4>
24.+ 2.%11>
24.0%+ 2.%10>
2%.11 2.%2%>
2%.3+9 2.%32>
2%.+14 2.%30>
2%.0% 2.%4%>2+.120 2.%%1>
2+.301 2.%%>
2+.+33 2.%+3>
2+.00+ 2.%+9>
2.139 2.%4>
2.394 2.%0>
2.+44 2.%0%>
2.09 2.%9>
20.1%3 2.%9+>
20.40 2.+1>
20.+%0 2.++>
20.914 2.+11>
29.1+9 2.+1+>
29.42% 2.+2>
29.+2 2.+2%>
29.920 2.+3>
3.103 2.+34>
3.444 2.+30>
-
7/25/2019 Ch 9 Cross Currency
35/107
00 15.000 20.000 25.000 30.000
rd curves adjusted for the CCBS
Unadjusted Forward curve
Adjusted Forward curve
-
7/25/2019 Ch 9 Cross Currency
36/107
-
7/25/2019 Ch 9 Cross Currency
37/107
-
7/25/2019 Ch 9 Cross Currency
38/107
9.+: 4reatin) a syntheti( forei)n asset: Swain) a USD "ond into floatin) Yen
Today's date 8 -!e"-#$
4*rrent sot rate 8 1#+.+#1
1. USD 5ond details: 2. USD swa details
?at"rit# F 1%-Sep-13
o"pon F 3.%> S
redemption F 1 ?at"rit# % #ears
rinipal 1 m USD
lean prie F 9+. 3 mo. /i$or M .+,$p mar!in
'ration of #ear F .11 to next o"pon
ar"ed interest F 3.339
dirt# prie F 99.339
USD Swap USD
*ond A* ashflows Swap da# A* mar
dates D's pa# side dates o"nt D's ashflo
+-'e$-0 1 99K339K41 H +-'e$-0 1
-++ 1-?ar-0 .111 3.1+9> .99+40% H +-?a#-0 .2% .992199 119K1
-+ 1%-Sep-0 .+1 3.22> .901%3+ -3K%K H +-"!-0 .2%+ .904%02 121K
-%4 1+-?ar-9 1.122 2.02+> .9+00+ H +-@o&-0 .2%+ .9% 121K
-40 1%-Sep-9 1.+31 2.43> .9%+2+3 -3K%K H +-'e$-9 .2%+ .9139 121K
-42 1%-?ar-1 2.133 2.2> .942%% H +-?a#-9 .24 .9+%303 11K0
-3+ 1%-Sep-1 2.+44 2.009> .92+44+ -3K%K H +-"!-9 .2%+ .9%9112 121K
-3 1%-?ar-11 3.14 3.21> .9931% H +-@o&-9 .2%+ .9%2%0+ 121K
-24 1%-Sep-11 3.+%0 3.14%> .091324 -3K%K H 0-'e$-1 .2+1 .94%4%0 124K4
-10 1%-?ar-12 4.1+4 3.2+4> .0293 H +-?a#-1 .242 .930249 11%K1
-12 1-Sep-12 4.+01 3.304> .0%3%3 -3K%K H +-"!-1 .2%+ .93114 121K
-+ 1%-?ar-13 %.10 3.499> .03431 H 0-@o&-1 .2+1 .921421 124K4
1%-Sep-13 %.+09 3.+12> .0142+% -13K%K H -'e$-11 .2%3 .912+4 12K4
+-?a#-11 .244 .942 11+K4
0-"!-11 .2+1 .09%0 124K4
-@o&-11 .2%3 .00+33 12K4
+-'e$-12 .2%3 .0+03 12K4
-?a#-12 .2%3 .0+4+ 12K4
+-"!-12 .2%3 .0%939 12K4+-@o&-12 .2%+ .040101 121K
+-'e$-13 .2%+ .03030 121K
+-?a#-13 .24 .020+% 11K0
+-"!-13 .2%+ .010+23 121K
8 6m
-
7/25/2019 Ch 9 Cross Currency
39/107
9.: Swain) a S< "ond into USD =i"or
Today's date: ,->*n-99
Details of the $ond iss"e,
rinipal 2% m =
?at"rit# 5 #ears
)o"pon 13.75% ann 3C3+
Ass"e prie 101.25
'NE 2.25
a#ment date 4 weeks after iss"e
)"rrent spot +.10 =C 93+K%9+
-"n- .001% .94%924 -34K3%K H .%0 %.039> 1K%0K92
-De- .02303 .91124 H .%0 +.10> 1K129K30%
-"n-1 .+01 .0043+ -34K3%K H .%+ +.+1> 1K214K1%+
-De-1 .1%%1 .0%9+9 H .%0 +.49+> 1K19%K%09
-"n-2 .++02+ .03912 -34K3%K H .%+ +.3> 1K231K0
9-De-2 .+222+ .03921 H .%14 +.%33> 1K21+K%4+
9-"n-3 .%04+9 .032 -34K3%K H .%+ +.+3%> 1K21K4+
0-De-3 .%3019 .%219+ H .%+ +.41> 1K239K020
-"n-4 .%19 .29 -204K3%K H .%+ +.0%3> 42K192K0%0
8 6=7 F 0K+K40
6 7
-
7/25/2019 Ch 9 Cross Currency
40/107
9.$: @ri(in) a , year Yen-USD diff swa
Today's date 8 -!e"-#$
4*rrent sot rate 8 1#+.+#1
rinipal amo"nt 1$n Yen
rinipal amo"nt 93.01 m USD
?at"rit# % #ears
o pa# + mo. Yen /i$or
o reei&e + mo. USD /i$or M -22$.#9$p(s
1. Yen ay side
Yen Yen
Unad;"sted da# A* Amplied da# d;"sted A*=-) rates o"nt "nad;"sted D's forwards o"nt =-) rates ad;"sted D's
I1J I2J
+-'e$-0 .+ .%0%> .9999+0 1
.% +-"!-0 .%11 .919> .%+ .99%313 .92%> .%+ .921> .99%3%%
1 +-'e$-9 1.22 .99> .%11 .90992 1.+%> 1.1 .99+> .909923
1.% +-"!-9 1.%2% .9> .%3 .90+2+1 .39> 1.%19 .910> .90+1%1
2 0-'e$-1 2.42 .0%3> .%1 .90230 .+94> 2.3+ .0+9> .9024+2
2.% +-"!-1 2.%39 .09> .49 .9929 .909> 2.%33 .9> .94+
3 -'e$-11 3.%3 .934> .%14 .9100+ 1.21> 3.4 .9%9> .91212
3.% 0-"!-11 3.%%0 .90> .%+ .9+%% 1.30> 3.%%3 1.1+> .9+4%%4
4 +-'e$-12 4.+4 1.34> .%+ .9%004 1.34> 4.%0 1.+9> .9%%4
4.% +-"!-12 4.%+9 1.0> .%+ .9%1932 1.43%> 4.%+4 1.110> .9%2%%
% +-'e$-13 %.01 1.12+> .%11 .94430 1.%+3> %.% 1.11> .94234
8 6Yen7 F
8 6Yen7 on 1 $n nominal F
@et 8 F
-
7/25/2019 Ch 9 Cross Currency
41/107
9.9: @ri(in) a , year Yen-USD ?*anto diff swa
Today's date 8 -!e"-#$
4*rrent sot rate 8 1#+.+#1
rinipal amo"nt 1$n Yen
?at"rit# % #ears
o pa# + mo. Yen /i$or
o reei&e + mo. USD /i$or M -23.## $p(s
1. Yen ay side 2. USD-related re(ei0e side
Yen Yen USD-related
da# Amplied A* /i$or Amplied /i$or
o"nt forwards ad;"sted df(s ashflows forwards ashflows
+-'e$-0 1
+-"!-0 .%+ .92%> .99%3%% -4+K+1K%3 3.9> 3+KK%3
.% +-'e$-9 .%11 1.+%> .909923 -%4K413K299 2.+%+> 14K%9%K0
1 +-"!-9 .%3 .39> .90+1%1 -3K1+9K93 2.%40> 0K924K04
1.% 0-'e$-1 .%1 .+94> .9024+2 -3%K04K%91 2.9%> 21K92K2+
2 +-"!-1 .49 .909> .94+ -49K1K22% 3.310> 4K11+K33+
2.% -'e$-11 .%14 1.21> .91212 -+2K101K+%4 3.+99> +0K294K103 0-"!-11 .%+ 1.30> .9+4%%4 -++K139K%3 3.90> K4+K33
3.% +-'e$-12 .%+ 1.34> .9%%4 -+9K4+%K22 4.11> 00K310K23
4 +-"!-12 .%+ 1.43%> .9%2%% -2K%+3K449 4.3%%> 1K32K1
4.% +-'e$-13 .%11 1.%+3> .94234 -9K094K%92 4.%02> 113K44K000
8 6Yen7 on 1 $n nominal F -%%%K20K331 %%%K20K331
@et 8 F
-
7/25/2019 Ch 9 Cross Currency
42/107
9.1#: @ri(in) a USD-Yen =T!/: analysin) the USD le) 1
Today's date: -!e"-#$
)"rrent spot 1+.+1
da# o"nt USD USD Up-front Up-front Up-front
atC3+ mid-market ashflow transation transation transation
rates %-#ear @et )' 4-#ear @et )' 3-#ear @et )'
I1J I2J I3J I4J I%J I+J IJ I0J
+-'e$-0 9+,7,92 9+%K%92 -337123 932K4+9 -32713 9K332
+-'e$-9 1.1 2.09+2%> # -34K40 -34K40 1K13 -33K3% 992 -32K314
0-'e$-1 1.19 2.9%> # -34K%2 -34K%2 1K1+ -33K39+ 994 -32K42
-'e$-11 1.11 3.3%> # -34K22 -34K22 1K9 -33K123 33K123
+-'e$-12 1.11 3.2%> # -34K22 -34K22 34K22
+-'e$-13 1.1 3.%%> 17###7### -1KK
-
7/25/2019 Ch 9 Cross Currency
43/107
9.11: @ri(in) a USD-Yen =T!/: analysin) the USD le) 2 @ote, the forwards ma# $e ra
Today's date: -!e"-#$
)"rrent spot 1+.+1
1. oney a(
da# o"nt USD USD D'(s USD USD Swap Anitial
atC3+ mid-market forwards ashflow transations a
rates
&olatilit# FG 1>
I1J I2J I3J I4J
+-'e$-0 1 03
+-'e$-9 1.1 2.09+2%> .9139 2.09+2%> # -3K%2 to reei&e fixed -2
0-'e$-1 1.19 2.9%> .94%4%0 2.33320> # -31K%4 to reei&e fixed -
-'e$-11 1.11 3.3%> .912+4 3.9014> # -32K13 to reei&e fixed -3
+-'e$-12 1.11 3.2%> .0+03 4.09399> # -33K123 to reei&e fixed -4
+-'e$-13 1.1 3.%%> .03030 4.%+%> 17###7### 9+%K%92 to pa# fixed -0
030K30
atri& < for (al(*latin) the hed)in) swas
1 2 3 4 %
2.09+3> 2.9%> 3.3%> 3.2%> 3.%%>
1 1.1 1.29 .20 .31 .33 .3+
2 1.19 . 1.20 .31 .33 .3+
3 1.11 . . 1.31 .33 .3%
4 1.11 . . . 1.33 .3%% 1.1 . . . . 1.3+
-
7/25/2019 Ch 9 Cross Currency
44/107
9.12: @ri(in) a USD-Yen =T!/
Today's date: -!e"-#$
)"rrent spot 1+.+1
da# o"nt USD USD D'(s USD USD Swap
atC3+ mid-market forwards ashflow transations
rates
&olatilit# FG 1>
+-'e$-0 1
+-'e$-9 1.1 2.09+2%> .9139 2.09+2%> # -3K%2 to reei&e fixed
0-'e$-1 1.19 2.9%> .94%4%0 2.21> # -31K%4 to reei&e fixed
-'e$-11 1.11 3.3%> .912+4 3.%9332> # -32K13 to reei&e fixed
+-'e$-12 1.11 3.2%> .0+03 4.1+1%> # -33K123 to reei&e fixed
+-'e$-13 1.1 3.%%> .03030 4.+21%> 17###7### 9+%K%92 to pa# fixed
030K30
-
7/25/2019 Ch 9 Cross Currency
45/107
9.13: Aal*ation of a 445S - sim*lation remo0ed
Bri)inal data
Today's date: -!e"-#$
)"rrent spot rate 1+.+1
USD prinipal 1 m
Y prinipal 1K++.1 m
))*S mar!in 4.%$p
USD Da# USD Y
D'(s o"nt 3 mo. 3 mo.
forwards forwards
"nad;"sted
+-'e$-0 1
+-?a#-0 .992199 .2% 3.14%> .0+%%>
+-"!-0 .904%02 .2%+ 3.22> .9+92>
+-@o&-0 .9% .2%+ 2.312> 1.9109>
+-'e$-9 .9139 .2%+ 2.%+21> 1.30+4>+-?a#-9 .9+%303 .24 2.%190> .0+02>
+-"!-9 .9%9112 .2%+ 2.%%0%> .++2>
+-@o&-9 .9%2%0+ .2%+ 2.+01> .+49+9>
0-'e$-1 .94%4%0 .2+1 2.004> .311>
+-?a#-1 .930249 .242 3.192> .993%>
+-"!-1 .93114 .2%+ 3.4222> 1.%++>
0-@o&-1 .921421 .2+1 3.+134> 1.1+94%>
-'e$-11 .912+4 .2%3 3.%2> 1.24%%2>
+-?a#-11 .942 .244 3.0394> 1.20+11>
0-"!-11 .09%0 .2+1 3.93%> 1.32329>
-@o&-11 .00+33 .2%3 4.394> 1.3%+4>
+-'e$-12 .0+03 .2%3 4.1%22> 1.30491>
-?a#-12 .0+4+ .2%3 4.234> 1.41%>
+-"!-12 .0%939 .2%3 4.39> 1.4%340>
+-@o&-12 .040101 .2%+ 4.%10> 1.%1+2%>
+-'e$-13 .03030 .2%+ 4.+00> 1.%99%1>
-
7/25/2019 Ch 9 Cross Currency
46/107
-
7/25/2019 Ch 9 Cross Currency
47/107
Cistori( data fo
sim*lation
'5 &ol FG
See 9.1% )orrela
Bri)inal Aal*ation for f"rther data
Y USD Y USD
D'(s ashflows ashflows forward
ad;"sted &olatilities
I1J I2J
1 1KK -1K++K1K
.99031 -0+K2% 24K319K012 9.1%>
.99%3%% -3K+2+ 2K+29K44 1.0+>
.992%1 -+9K903 3K91K%3 1.9%>
.909923 -+%4K%4 29K%2K9+ 12.493>.90914 -+22K930 22K440K99 13.+9%>
.90+1%1 -+%3K03 19K+42K2+2 14.%%2>
.90443 -+0%K1%3 10K92%K% 1%.30>
.9024+2 -%3K921 21K+4K%+ 1%.12+>
.90211 -+0K31% 24K%0%K00% 1%.3%9>
.94+ -04K%+1 3K1K234 1%.34>
.9430 -943K%12 33K03K9% 1+.2+>
.91212 -940K413 34K4K%0 1+.942>
.9+042 -930K%2 34K+0%K90 1.200>
.9+4%%4 -1K2K404 30K0%K043 1.294>
.9+100 -1K21K+0 3K1K9+ 1+.9%%>
.9%%4 -1K49K%0 30K%3K9% 1+.2+1>
.9%3949 -1K0K229 39K22K42 1%.29>
.9%2%% -1K19K+09 4K30K%1% 1%.3%+>
.94+3% -1K1%K4%3 42K%32K21 1%.14%>
.94234 -11K1K9% 1K4K9K%34 1%.11>
8al"e F . .
-
7/25/2019 Ch 9 Cross Currency
48/107
-
7/25/2019 Ch 9 Cross Currency
49/107
6ew market data
2>
@ew spot '5 rat
ion sheet
new new new
Y USD USD Y
forward 3 mo. D'(s 3 mo.
&olatilities forwards forwards
"nad;"sted
1.2 1.2
14.%2>
1%.120>
1+.4+2>
10.4> +-'e$-9 12.%43> +-?a#-9 1.9%2> .99%141 .0232>
21.020> +-"!-9 2.+2%+> .900%0 .%%04>
22.%%+> +-@o&-9 2.%4> .902133 .+%109>
22.+09> 0-'e$-1 3.049> .9420% .+3%+2>
23.30> +-?a#-1 3.2323> .9++33 .94+>
23.+1> +-"!-1 3.%41> .9%01%3 .93%>
24.39> 0-@o&-1 4.0%+> .9404 1.2%+>
2%.414> -'e$-11 4.4030> .9341% .01+3>
2%.932> +-?a#-11 %.02> .92+0 1.10%>
2%.941> 0-"!-11 4.+%22> .9149+3 1.%+0>
2%.432> -@o&-11 %.19%2> .9313 1.%21>
24.392> +-'e$-12 4.+2%%> .092+++ 1.34%>
23.%93> -?a#-12 %.124> .001490 1.31>
23.34> +-"!-12 4.290> .02+9 1.+23>
22.10> +-@o&-12 4.424+> .0+20%2 1.+%%>
22.+%1> +-'e$-13 %.1+0+> .0%1+4 1.2439>
-
7/25/2019 Ch 9 Cross Currency
50/107
-
7/25/2019 Ch 9 Cross Currency
51/107
e F 11%.1 6ew Aal*ation
old new new
Y Y Y USD Y
3 mo. 3 mo. D'(s ashflows ashflows
forwards forwards
ad;"sted ad;"sted ad;"sted
I3J I4J
1.022%0> .0093+> .990+ -400K32 22K909K20+
.+99%%> .%9%09> .99+209 -+K94 1%K+0K199
.+01> .+0332> .994%%2 -+49K112 1K%9K10
.2> .++9+1> .99201+ -0%K%0 1K+92K434
.94994> .029%1> .9903 -01K141 2K4%+K%11
1.90+9> .939%> .9004% -09%K49 24K+13K+1%
1.213%> 1.29+++> .90%122 -1K++K93 34K9%K12
1.29+2> .04%%0> .9032 -1K133K41+ 21K900K99
1.33940> 1.+13> .904 -1K224K21 2+K%4+K%2%
1.3049%> 1.+%34> .9+2 -1K214K3% 43K091K+19
1.42++9> 1.+%3> .92324 -1K313K219 41K14K421
1.4+313> 1.924+> .9+9+4+ -1K1+9K213 2K0+4K13
1.49193> 1.03%> .9+%101 -1K2+K22 4+K+21K+9%
1.%3011> 1.142> .9+11+ -1K10K+49 43K++3K19
1.+40> 1.0%41> .9%++2 -1K13K44 4+K49K01
1.+9%%> 1.314> .9%3399 -11K32K0%9 1K+93K900K02+
8al"e 6Yen7 F 1K+3K2+K94
-
7/25/2019 Ch 9 Cross Currency
52/107
@et 8al"e 6USD7 F -K%1K%
-
7/25/2019 Ch 9 Cross Currency
53/107
9.1: Aal*ation of a 445S with sim*lation
Bri)inal data
Today's date: -!e"-#$
)"rrent spot rate 1+.+1
USD prinipal 1 m
Y prinipal 1K++.1 m
))*S mar!in 4.%$p
USD Da# USD Y
D'(s o"nt 3 mo. 3 mo.
forwards forwards
"nad;"sted
+-'e$-0 1
+-?a#-0 .992199 .2% 3.14%> .0+%%>
+-"!-0 .904%02 .2%+ 3.22> .9+92>
+-@o&-0 .9% .2%+ 2.312> 1.9109>
+-'e$-9 .9139 .2%+ 2.%+21> 1.30+4>+-?a#-9 .9+%303 .24 2.%190> .0+02>
+-"!-9 .9%9112 .2%+ 2.%%0%> .++2>
+-@o&-9 .9%2%0+ .2%+ 2.+01> .+49+9>
0-'e$-1 .94%4%0 .2+1 2.004> .311>
+-?a#-1 .930249 .242 3.192> .993%>
+-"!-1 .93114 .2%+ 3.4222> 1.%++>
0-@o&-1 .921421 .2+1 3.+134> 1.1+94%>
-'e$-11 .912+4 .2%3 3.%2> 1.24%%2>
+-?a#-11 .942 .244 3.0394> 1.20+11>
0-"!-11 .09%0 .2+1 3.93%> 1.32329>
-@o&-11 .00+33 .2%3 4.394> 1.3%+4>
+-'e$-12 .0+03 .2%3 4.1%22> 1.30491>
-?a#-12 .0+4+ .2%3 4.234> 1.41%>
+-"!-12 .0%939 .2%3 4.39> 1.4%340>
+-@o&-12 .040101 .2%+ 4.%10> 1.%1+2%>
+-'e$-13 .03030 .2%+ 4.+00> 1.%99%1>
-
7/25/2019 Ch 9 Cross Currency
54/107
-
7/25/2019 Ch 9 Cross Currency
55/107
Cistori( data fo
sim*lation
'5 &ol FG
See 9.1% )orrela
Bri)inal Aal*ation for f"rther data
Y USD Y USD
D'(s ashflows ashflows forward
ad;"sted &olatilities
I1J I2J
1 1KK -1K++K1K
.99031 -0+K2% 24K319K012 9.1%>
.99%3%% -3K+2+ 2K+29K44 1.0+>
.992%1 -+9K903 3K91K%3 1.9%>
.909923 -+%4K%4 29K%2K9+ 12.493>.90914 -+22K930 22K440K99 13.+9%>
.90+1%1 -+%3K03 19K+42K2+2 14.%%2>
.90443 -+0%K1%3 10K92%K% 1%.30>
.9024+2 -%3K921 21K+4K%+ 1%.12+>
.90211 -+0K31% 24K%0%K00% 1%.3%9>
.94+ -04K%+1 3K1K234 1%.34>
.9430 -943K%12 33K03K9% 1+.2+>
.91212 -940K413 34K4K%0 1+.942>
.9+042 -930K%2 34K+0%K90 1.200>
.9+4%%4 -1K2K404 30K0%K043 1.294>
.9+100 -1K21K+0 3K1K9+ 1+.9%%>
.9%%4 -1K49K%0 30K%3K9% 1+.2+1>
.9%3949 -1K0K229 39K22K42 1%.29>
.9%2%% -1K19K+09 4K30K%1% 1%.3%+>
.94+3% -1K1%K4%3 42K%32K21 1%.14%>
.94234 -11K1K9% 1K4K9K%34 1%.11>
8al"e F . .
-
7/25/2019 Ch 9 Cross Currency
56/107
-
7/25/2019 Ch 9 Cross Currency
57/107
6ew market data
@ote, the &al"ation an $e sim"lated $# pressin!
2>
ion sheet
new
Y Unorrelated )orrelated USD
forward normal r&(s normal r&(s 3 mo.
&olatilities forwards
/en!th of time FG 1.2
14.%2> .%+ .%+
1%.120> .1 .23
1+.4+2> 2.4 1.9
10.4> +-'e$-9 1.04 2.4+2.%43> +-?a#-9 -.03 .19 2.%0+%>
21.020> +-"!-9 -1.3 -.00 2.2499>
22.%%+> +-@o&-9 -.%1 -.01 2.314>
22.+09> 0-'e$-1 .+% .29 3.1+1>
23.30> +-?a#-1 1.3 1.3 3.9321>
23.+1> +-"!-1 1.0 1.%3 4.3+32>
24.39> 0-@o&-1 .1 .+ 3.9002>
2%.414> -'e$-11 -.9 .1% 3.049>
2%.932> +-?a#-11 .+ .11 3.9130>
2%.941> 0-"!-11 .14 .10 4.%9>
2%.432> -@o&-11 -1.0 -1.%9 3.+>
24.392> +-'e$-12 .2+ -.30 3.919>
23.%93> -?a#-12 -.2 -.33 4.%%4>
23.34> +-"!-12 -.9+ -1.1 3.%22>
22.10> +-@o&-12 -.1 -.4 4.2340>
22.+%1> +-'e$-13 .11 -.% 4.%4%>
-
7/25/2019 Ch 9 Cross Currency
58/107
-
7/25/2019 Ch 9 Cross Currency
59/107
'9 ke#
@ew spot '5 rate F
new new old
USD Unorrelated )orrelated Y Y
D'(s normal r&(s normal r&(s 3 mo. 3 mo.
forwards forwards
"nad;"sted ad;"sted
1.2
.9 .9
.3 .31
-.2 -.%
1 -2.11 -1.93.993+4+ -.%2 -1.29 .+11+> .022%0>
.909++ .+9 .0 .+0+> .+99%%>
.9021% -.2 .1 .+%92> .+01>
.94341 -.09 -.01 .+0> .2>
.9+%1 .40 .1 .9329> .94994>
.9%4%2+ -1.32 -1.1+ .0213> 1.90+9>
.944+00 .21 -.29 1.0044> 1.213%>
.93%%04 .%1 .34 1.3%22> 1.29+2>
.92+10 .30 .40 1.4%924> 1.33940>
.912 -1.2 -.2 1.940+> 1.3049%>
.99923 1.32 .09 1.+12> 1.42++9>
.913+ -2.1 -1.%3 .9%134> 1.4+313>
.091093 -.01 -1.30 1.1+2+> 1.49193>
.003%13 -1.+0 -2.11 .09%> 1.%3011>
.04%4 -.+0 -1.%1 1.303> 1.+40>
.0+39%4 -.01 -1.30 1.1+021> 1.+9%%>
-
7/25/2019 Ch 9 Cross Currency
60/107
-
7/25/2019 Ch 9 Cross Currency
61/107
-
7/25/2019 Ch 9 Cross Currency
62/107
-
7/25/2019 Ch 9 Cross Currency
63/107
9.1,: 4orrelation matri& - *sed in the Sim*lation
)orrelation matrix
USD forward rate (orrelation matri&
/amda #.9,
1 2 3 4 % + 0 9 1 11 12 13
1 1 .30+ .149+ .%0 .224 .0 .33 .13 .% .2 .1 . . .
2 .30+ 1 .30+ .149+ .%0 .224 .0 .33 .13 .% .2 .1 . .
3 .149+ .30+ 1 .30+ .149+ .%0 .224 .0 .33 .13 .% .2 .1 .
4 .%0 .149+ .30+ 1 .30+ .149+ .%0 .224 .0 .33 .13 .% .2 .% .224 .%0 .149+ .30+ 1 .30+ .149+ .%0 .224 .0 .33 .13 .% .
+ .0 .224 .%0 .149+ .30+ 1 .30+ .149+ .%0 .224 .0 .33 .13 .
.33 .0 .224 .%0 .149+ .30+ 1 .30+ .149+ .%0 .224 .0 .33 .
0 .13 .33 .0 .224 .%0 .149+ .30+ 1 .30+ .149+ .%0 .224 .0 .
9 .% .13 .33 .0 .224 .%0 .149+ .30+ 1 .30+ .149+ .%0 .224 .
1 .2 .% .13 .33 .0 .224 .%0 .149+ .30+ 1 .30+ .149+ .%0 .2
11 .1 .2 .% .13 .33 .0 .224 .%0 .149+ .30+ 1 .30+ .149+ .%
12 . .1 .2 .% .13 .33 .0 .224 .%0 .149+ .30+ 1 .30+ .14
13 . . .1 .2 .% .13 .33 .0 .224 .%0 .149+ .30+ 1 .30
14 . . . .1 .2 .% .13 .33 .0 .224 .%0 .149+ .30+
1% . . . . .1 .2 .% .13 .33 .0 .224 .%0 .149+ .30
1+ . . . . . .1 .2 .% .13 .33 .0 .224 .%0 .14
1 . . . . . . .1 .2 .% .13 .33 .0 .224 .%
10 . . . . . . . .1 .2 .% .13 .33 .0 .2
19 . . . . . . . . .1 .2 .% .13 .33 .
2 . . . . . . . . . .1 .2 .% .13 .
4holesky de(omosition res*lt
1
.30+ .9222
.149+ .3%++ .9222
.%0 .139 .3%++ .9222
.224 .%33 .139 .3%++ .9222
.0 .2+ .%33 .139 .3%++ .9222
.33 .0 .2+ .%33 .139 .3%++ .9222
.13 .31 .0 .2+ .%33 .139 .3%++ .9222
.% .12 .31 .0 .2+ .%33 .139 .3%++ .9222 .2 .% .12 .31 .0 .2+ .%33 .139 .3%++ .9222
.1 .2 .% .12 .31 .0 .2+ .%33 .139 .3%++ .9222
. .1 .2 .% .12 .31 .0 .2+ .%33 .139 .3%++ .9222
. . .1 .2 .% .12 .31 .0 .2+ .%33 .139 .3%++ .9222
. . . .1 .2 .% .12 .31 .0 .2+ .%33 .139 .3%++ .92
. . . . .1 .2 .% .12 .31 .0 .2+ .%33 .139 .3%
. . . . . .1 .2 .% .12 .31 .0 .2+ .%33 .13
. . . . . . .1 .2 .% .12 .31 .0 .2+ .%
. . . . . . . .1 .2 .% .12 .31 .0 .2
. . . . . . . . .1 .2 .% .12 .31 .
. . . . . . . . . .1 .2 .% .12 .
)hek matrix. . . . . . . . . . . . . .
. . . . . . . . . . . . . .
. . . . . . . . . . . . . .
. . . . . . . . . . . . . .
. . . . . . . . . . . . . .
. . . . . . . . . . . . . .
. . . . . . . . . . . . . .
. . . . . . . . . . . . . .
. . . . . . . . . . . . . .
. . . . . . . . . . . . . .
. . . . . . . . . . . . . .
. . . . . . . . . . . . . .
. . . . . . . . . . . . . .
. . . . . . . . . . . . . .
-
7/25/2019 Ch 9 Cross Currency
64/107
9.1+: ;e"alan(in) the Aal*ation of a 445S with ero mar)in off *nad*st
Cistori( data for 6ew market data
sim*lation
'5 &ol FG 2>
USD prinipal 1
Y prinipal 1K++.1
See )orrelation sheet for
f"rther data
Da# new
USD Y o"nt USD
forward forward 3 mo.
&olatilities &olatilities forwards
/en!th of time FG 1.2
+-'e$-0
9.1%> 14.%2>
1.0+> 1%.120>
1.9%> 1+.4+2>
12.493> 10.4> +-'e$-913.+9%> 2.%43> +-?a#-9 .24 2.100>
14.%%2> 21.020> +-"!-9 .2%+ 2.430%>
1%.30> 22.%%+> +-@o&-9 .2%+ 3.%9+42>
1%.12+> 22.+09> 0-'e$-1 .2+1 3.939>
1%.3%9> 23.30> +-?a#-1 .242 3.%+09>
1%.34> 23.+1> +-"!-1 .2%+ 3.4%+0>
1+.2+> 24.39> 0-@o&-1 .2+1 3.43309>
1+.942> 2%.414> -'e$-11 .2%3 3.3090>
1.200> 2%.932> +-?a#-11 .244 4.4%0%>
1.294> 2%.941> 0-"!-11 .2+1 %.410>
1+.9%%> 2%.432> -@o&-11 .2%3 %.+9%0%>
1+.2+1> 24.392> +-'e$-12 .2%3 4.0+43>
1%.29> 23.%93> -?a#-12 .2%3 4.99%04>
1%.3%+> 23.34> +-"!-12 .2%3 %.0%2%%>
1%.14%> 22.10> +-@o&-12 .2%+ 4.0091>
1%.11> 22.+%1> +-'e$-13 .2%+ 3.%%2%4>
-
7/25/2019 Ch 9 Cross Currency
65/107
-
7/25/2019 Ch 9 Cross Currency
66/107
d (*r0es - sim*lation remo0ed
m ld spot '5 rate F 1+.+1
m @ew spot '5 rate F 94.9 6ew Aal*ation
1. he ori!inal pri
new new new
USD Y Y USD
D'(s 3 mo. D'(s ashflows
forwards
"nad;"sted "nad;"sted
1.2
1 1.994+3 .919> .9933 -%39K1%0
.9011 .+4901> .99+9 -1K2+
.901+ 1.330> .9933%4 -919K0%
.9+91 .0+11> .991319 -991K%41
.9+039 1.2210> .9000+ -0+K%49
.9%242% 1.4%010> .90%2% -003K421
.9439+1 1.2330> .902119 -09+K+2
.93%9+2 2.2210> .9++3+ -0%4K+3+
.92+9+ 1.2902+> .93%4+ -900K90%
.91343 1.43002> .9+993 -1K420K%+1
.93 1.%+4> .9++%3 -1K439K0%
.009032 1.%4++> .9+2200 -1K229K+%
.003% 1.0+3%> .9% -1K2+2K030
.0+%92% 1.239+> .9%404 -1K49K39%
.0%%4%% 1.202+> .9%1++% -1K223K031
.04%9 1.134> .940924 -1K9K02
8al"e 6Yen7 F
-
7/25/2019 Ch 9 Cross Currency
67/107
@et 8al"e 6USD7 F
-
7/25/2019 Ch 9 Cross Currency
68/107
ipals 2. e$alaned
Y Y
ashflows ashflows
I1J I2J
171+372337+#24K221K22+ 21K%0K190
1K2K4%2 1%KK%4
29K241K4+ 2+K%K+3+
21K001K249 19K493K%+
2+K333K300 23K4%9K00
39K24K329 3%K309K%90
33K49%K49 29K04K+02
%9K0%K9 %3K319K219
33K03K133 3K130K%0
4K49K%2 3%K+0K00+
42K40K3%1 3K043K99
41K3K090 3K1%3K1%%
%K21+K333 44K3+K11
33K4K0 29K+1K+00
34K942K901 31K129K991
1K+9K09+K2 9K%24K32K%%2
1K++K1K 1K++K1K
-
7/25/2019 Ch 9 Cross Currency
69/107
12K240K+4 12K240K+4
-
7/25/2019 Ch 9 Cross Currency
70/107
-
7/25/2019 Ch 9 Cross Currency
71/107
-
7/25/2019 Ch 9 Cross Currency
72/107
-
7/25/2019 Ch 9 Cross Currency
73/107
-
7/25/2019 Ch 9 Cross Currency
74/107
ipals 2. e$alaned
Y Y
ashflows ashflows
I1J I2J
-2792971227399
23K103K1 29K%%3K10%
24K+%K4+ 31K%K303
23K434K+ 29K03K020
24K320K90 31K13K20
2+K13+K%41 33K310K193
2K433K932 34K92K4
34K4+K+%2 43K929K%%+
33K39K1+2 42K4+1K+++
24K3%%K3 31K4K%13
3K3%K9 30K22K29
33K30K3 42K%49K%13
%2K%3%K0+ ++K91K3
41K+3+K% %3KK41
4+K029K%%% %9K+9K11
%3K31K1 +K9+K3+2
1K+90K09+K94 13K+30K+9K%%0
-
7/25/2019 Ch 9 Cross Currency
75/107
0K44%K2%4 0K44%K2%4
-21K%%4K4+ -21K%%4K4+
-
7/25/2019 Ch 9 Cross Currency
76/107
9.1$: ;e"alan(in) the Aal*ation of a 445S with mar)in off *nad*sted (*
Cistori( data for 6ew market data
sim*lation
'5 &ol FG 2>
USD prinipal 1
Y prinipal 1K++.1
See )orrelation sheet for 445S mar)in .,#
f"rther data
Da# new
USD Y o"nt USD
forward forward 3 mo.
&olatilities &olatilities forwards
/en!th of time FG 1.2
+-'e$-0
9.1%> 14.%2>
1.0+> 1%.120>
1.9%> 1+.4+2>
12.493> 10.4> +-'e$-913.+9%> 2.%43> +-?a#-9 .24 2.0%>
14.%%2> 21.020> +-"!-9 .2%+ 2.9001>
1%.30> 22.%%+> +-@o&-9 .2%+ 3.+91%>
1%.12+> 22.+09> 0-'e$-1 .2+1 2.0%%+3>
1%.3%9> 23.30> +-?a#-1 .242 3.24+>
1%.34> 23.+1> +-"!-1 .2%+ 3.19302>
1+.2+> 24.39> 0-@o&-1 .2+1 3.00121>
1+.942> 2%.414> -'e$-11 .2%3 4.4244>
1.200> 2%.932> +-?a#-11 .244 4.14429>
1.294> 2%.941> 0-"!-11 .2+1 4.3429>
1+.9%%> 2%.432> -@o&-11 .2%3 4.3+994>
1+.2+1> 24.392> +-'e$-12 .2%3 4.991>
1%.29> 23.%93> -?a#-12 .2%3 3.930+9>
1%.3%+> 23.34> +-"!-12 .2%3 4.2019>
1%.14%> 22.10> +-@o&-12 .2%+ 4.992>
1%.11> 22.+%1> +-'e$-13 .2%+ 4.3%3>
-
7/25/2019 Ch 9 Cross Currency
77/107
-
7/25/2019 Ch 9 Cross Currency
78/107
0es - sim*lation remo0ed
m ld spot '5 rate F 1+.+1
m @ew spot '5 rate F 9+.14 6ew Aal*ation
$p
1. he ori!inal pri
new new new 11.112+4+1
USD Y Y USD
D'(s 3 mo. D'(s ashflows
forwards
"nad;"sted "nad;"sted
1.2
1 1.9931%+ .9%1++> .99+%3 -+09K132
.90%+%3 .%20%> .99+194 -+1K2%
.9902 .%109> .99441 -04K339
.944 .%34%> .9920 -4%K+3
.9+3122 1.13433> .993 -91K3+2
.9%%32% .00404> .9004 -01+K190
.94%4 1.11%%+> .90491 -1K13K42+
.93%201 1.19+1> .902430 -1K110K3
.92%91 1.20393> .993+% -1K13K%
.91%44% .9+9%> .9+092 -1K142K1
.9%443 1.12999> .9419 -1K14K+2%
.094192 1.2+0%> .9114 -1K2%0K3%
.00%3 1.34%3> .9++%2 -99%K+13
.0%09+ 1.22014> .9+4+%0 -1K02K300
.0+%43 1.42%0> .9+11%1 -1K2%4K%9
.0%+213 1.%%02> .9%34 -11K31K3%4
8al"e 6Yen7 off Unad;"sted "r&e F
-
7/25/2019 Ch 9 Cross Currency
79/107
@et 8al"e 6USD7 F
-
7/25/2019 Ch 9 Cross Currency
80/107
ipals 2. e$alaned
Y ashflows
Y
ashflows ))*S mar!in )'(s
on delta-'5
I1J I2J I3J
17#77+,$2+K2++K101 23K+09K1+ 11+K3%
1+K031K+4 1%K10K33+ 12K29
1+K0%K+0+ 1%K1%+K01+ 12K29
22K224K4+ 2K44K192 122K094
3K301K+0 2K4K024 113K42
2%K331K+ 22K04%K40 12K29
32K33K003 29K134K42+ 122K094
20K+0K41 2%K02K1 110K91
34K+29K339 31K231K23 11%K49
20K24K3+ 2%K4+9K%91 122K094
31K++1K042 20K%%%K30 110K91
3%K10K9% 31K3%K%49 110K91
30K2%1K1%9 34K490K192 110K91
34K3+K433 3K94K490 110K91
4K11+K+1 3+K10K+1+ 12K29
1K3K+4K024 9K+%3K%K4+ 12K29
1K+9K1+K0%3 1K+9K1+K0%3 1K01K3
-
7/25/2019 Ch 9 Cross Currency
81/107
117#71,$ 117#71,$
-
7/25/2019 Ch 9 Cross Currency
82/107
9.19: ;e"alan(in) the Aal*ation of a 445S with mar)in off *nad*sted (*
Cistori( data for 6ew market data
sim*lation
@ote, the &al"ation an $
'5 &ol FG 2>
USD prinipal 1
Y prinipal 1K++.1
See )orrelation sheet for 445S mar)in .,#
f"rther data
Da# new
USD Y o"nt USD
forward forward 3 mo.
&olatilities &olatilities forwards
/en!th of time FG 1.2
+-'e$-0
9.1%> 14.%2>
1.0+> 1%.120>
1.9%> 1+.4+2>
12.493> 10.4> +-'e$-913.+9%> 2.%43> +-?a#-9 .24 2.999>
14.%%2> 21.020> +-"!-9 .2%+ 2.%1+02>
1%.30> 22.%%+> +-@o&-9 .2%+ 2.133++>
1%.12+> 22.+09> 0-'e$-1 .2+1 2.19%1>
1%.3%9> 23.30> +-?a#-1 .242 3.11+3>
1%.34> 23.+1> +-"!-1 .2%+ 3.13%3>
1+.2+> 24.39> 0-@o&-1 .2+1 3.4%+3>
1+.942> 2%.414> -'e$-11 .2%3 3.1%103>
1.200> 2%.932> +-?a#-11 .244 3.+4+>
1.294> 2%.941> 0-"!-11 .2+1 3.3041>
1+.9%%> 2%.432> -@o&-11 .2%3 3.041%+>
1+.2+1> 24.392> +-'e$-12 .2%3 3.+%3%>
1%.29> 23.%93> -?a#-12 .2%3 3.%+9+>
1%.3%+> 23.34> +-"!-12 .2%3 4.4%+2>
1%.14%> 22.10> +-@o&-12 .2%+ 3.2240>
1%.11> 22.+%1> +-'e$-13 .2%+ 3.019>
-
7/25/2019 Ch 9 Cross Currency
83/107
-
7/25/2019 Ch 9 Cross Currency
84/107
0es - *sin) sim*lation
sim"lated $# pressin! '9 ke#
m ld spot '5 rate F 1+.+1
m @ew spot '5 rate F 14.24 6ew Aal*ation
$p
1. he ori!inal pri
new new new
USD Y Y USD
D'(s 3 mo. D'(s ashflows
forwards
"nad;"sted "nad;"sted
1.2
1 1.992+30 .+241> .990119 -41K+1
.90+29% .%%2%> .99+11 -+43K100
.9094+ .%32+> .99%3%+ -%4%K2+
.9%3%% .009> .993312 -%3K102
.9+0+% 1.1224> .99+24 -%3K122
.9+3 1.092> .9009% -01K244
.9%19% 1.3+1> .90%134 -009K240
.944301 1.2+%4> .901993 -9+K11
.93+%1 .941> .99++9 -009K92%
.920%2 1.1393> .902 -003K+2+
.910929 .02992> .9%3 -91K+2
.91%21 1.2333> .92%21 -923K49
.9230 1.9+04%> .9++ -92K3%
.092324 2.12429> .9+2%3 -1K12+K00
.00%24 1.13%> .9%03 -024K0
.0+%%2 1.%129> .9%41 -1K9++K40%
8al"e 6Yen7 off Unad;"sted "r&e F
-
7/25/2019 Ch 9 Cross Currency
85/107
@et 8al"e 6USD7 F
-
7/25/2019 Ch 9 Cross Currency
86/107
ipals 2. e$alaned
Y ashflows
Y
ashflows ))*S mar!in )'(s
on delta-'5
I1J I2J I3J
23+72237+,21K20K%% 2K0K092 2+K233
1+K29K39+ 1%K919K29+ 2K11
1%K3K11+ 1%K309K1 2K11
23K100K012 22K+%K04 2K
3K03K3+ 29K41K0+2 2%K+43
3K+2K9 29K994K421 2K11
31K13+K93 3K44K3+2 2K
3%K31K%%4 34K%29K403 2+K022
2+K4%9K%43 2%K04K2% 2%K930
29K44K909 20K023K1 2K
23K%%K904 23K%4K402 2+K022
20K0K+2 20K1%K03 2+K022
%4K2%%K10% %3K%%K%0 2+K022
%0K4%4K34+ %K1+1K334 2+K022
4K%%K2% 4+K%22K++4 2K11
1K9K3%K440 1K42K1%1K22+ 2K11
1K+9K13K404 1K+9K13K404 421K9+
-
7/25/2019 Ch 9 Cross Currency
87/107
27,7#11 27,7#11
-
7/25/2019 Ch 9 Cross Currency
88/107
9.2#: ;e"alan(in) the Aal*ation of a 445S with mar)in off ad*sted (*r0
Cistori( data for 6ew market data
sim*lation
'5 &ol FG 2>
USD prinipal 1
Y prinipal 1K++.1
See )orrelation sheet for 445S mar)in .,#
f"rther data
Da# new
USD Y o"nt USD
forward forward 3 mo.
&olatilities &olatilities forwards
/en!th of time FG 1.2
+-'e$-0
9.1%> 14.%2>
1.0+> 1%.120>
1.9%> 1+.4+2>
12.493> 10.4> +-'e$-913.+9%> 2.%43> +-?a#-9 .24 1.044+1>
14.%%2> 21.020> +-"!-9 .2%+ 2.931>
1%.30> 22.%%+> +-@o&-9 .2%+ 2.+%2%+>
1%.12+> 22.+09> 0-'e$-1 .2+1 2.+3%3>
1%.3%9> 23.30> +-?a#-1 .242 2.993>
1%.34> 23.+1> +-"!-1 .2%+ 2.%33%+>
1+.2+> 24.39> 0-@o&-1 .2+1 3.+4>
1+.942> 2%.414> -'e$-11 .2%3 2.++%>
1.200> 2%.932> +-?a#-11 .244 2.99%40>
1.294> 2%.941> 0-"!-11 .2+1 3.+4+%>
1+.9%%> 2%.432> -@o&-11 .2%3 4.310>
1+.2+1> 24.392> +-'e$-12 .2%3 %.1++1>
1%.29> 23.%93> -?a#-12 .2%3 %.3%+>
1%.3%+> 23.34> +-"!-12 .2%3 4.1+>
1%.14%> 22.10> +-@o&-12 .2%+ 4.339>
1%.11> 22.+%1> +-'e$-13 .2%+ 3.33>
-
7/25/2019 Ch 9 Cross Currency
89/107
-
7/25/2019 Ch 9 Cross Currency
90/107
-
7/25/2019 Ch 9 Cross Currency
91/107
-
7/25/2019 Ch 9 Cross Currency
92/107
6ew Aal*ation
1. he ori!inal prinipals 2. e$alaned
Y ashflows
USD Y
ashflows ashflows ))*S mar!in )'(s
on delta-'5
I1J I2J I3J
-%K344K03%-4%+K20 19K+10K041 2K+01K30+ -+4K23
-41K94 20K494K31 3K3K%%2 -++K39%
-+K0+ 22K191K39 23K393K2 -++K39%
-+00K+0 24K4+K94+ 2+K0K22+ -+K030
-+1K01+ 2+K934K412 20K393K1+4 -+2K0+
-+4K4++ 32K+K3+1 33K04K11 -++K39%
-99K14 2K924K44 29K43+K04 -+K030
-+99K+ 2+K1+%K91 2K%02K1 -+%K+3
-32K22 34K30K32 3+K24K23 -+3K%0
-9%2K143 42K92K4+% 4%K11K0 -+K030
-1K10K4 31K04K1 32K+K+4 -+%K+3
-1K3%K0+ 43K220K33 4%K%+9K239 -+%K+3
-1K3%0K+9+ 43K40K44 4%K033K2 -+%K+3
-1K1%K1%+ 4+K9%K934 49K33K34 -+%K+3
-1K11K93 ++K129K2 +9K1K%04 -++K39%
-1K043K411 1K1K2K044 11K29K0K24 -++K39%
1K+%3K100K0 1K+%2K013K34 -1K29K04
-
7/25/2019 Ch 9 Cross Currency
93/107
-,7199719+ -%K211K+91
1K+9K132K900 1K+0K1+3K04 -1K3K01+
6a7 6$7 67
-2%K944K90 -2K3%K+9 1K12
-1K44K1%
-
7/25/2019 Ch 9 Cross Currency
94/107
@et Y
ashflows
I4J
-,+79#7$92K+01K30+
3K3K%%2
23K393K2
2+K0K22+
20K393K1+4
33K04K11
29K43+K04
2K%02K1
3+K24K23
4%K11K0
32K+K+4
4%K%+9K239
4%K033K2
49K33K34
+9K1K%04
11K29K0K24
1K+%3K100K0
-
7/25/2019 Ch 9 Cross Currency
95/107
-,7199719+
-
7/25/2019 Ch 9 Cross Currency
96/107
9.21: ;e"alan(in) the Aal*ation of a 445S with mar)in off ad*sted (*r0
Cistori( data for 6ew market data
sim*lation
@ote, the &al"ation an $
'5 &ol FG 2>
USD prinipal 1
Y prinipal 1K++.1
See )orrelation sheet for 445S mar)in .,#
f"rther data
Da# new
USD Y o"nt USD
forward forward 3 mo.
&olatilities &olatilities forwards
/en!th of time FG 1.2
+-'e$-0
9.1%> 14.%2>
1.0+> 1%.120>
1.9%> 1+.4+2>
12.493> 10.4> +-'e$-913.+9%> 2.%43> +-?a#-9 .24 2.134>
14.%%2> 21.020> +-"!-9 .2%+ 2.29%3>
1%.30> 22.%%+> +-@o&-9 .2%+ 2.234%>
1%.12+> 22.+09> 0-'e$-1 .2+1 3.+03>
1%.3%9> 23.30> +-?a#-1 .242 2.3+93+>
1%.34> 23.+1> +-"!-1 .2%+ 3.3400>
1+.2+> 24.39> 0-@o&-1 .2+1 4.19%4>
1+.942> 2%.414> -'e$-11 .2%3 2.0%0>
1.200> 2%.932> +-?a#-11 .244 3.+0234>
1.294> 2%.941> 0-"!-11 .2+1 4.+1902>
1+.9%%> 2%.432> -@o&-11 .2%3 4.0242>
1+.2+1> 24.392> +-'e$-12 .2%3 4.000>
1%.29> 23.%93> -?a#-12 .2%3 2.+3>
1%.3%+> 23.34> +-"!-12 .2%3 3.1309>
1%.14%> 22.10> +-@o&-12 .2%+ 4.429%>
1%.11> 22.+%1> +-'e$-13 .2%+ 4.%34>
-
7/25/2019 Ch 9 Cross Currency
97/107
-
7/25/2019 Ch 9 Cross Currency
98/107
s - *sin) sim*lation
sim"lated $# pressin! '9 ke#
m ld spot '5 rate F 1+.+1
m @ew spot '5 rate F 1+.%
$p
new new new new new
USD Y Y Y Y
D'(s 3 mo. 3 mo. D'(s D'(s
forwards forwards
"nad;"sted ad;"sted "nad;"sted ad;"sted
1.2
1 1 1.994+%+ .+9> .2+> .9902%+ .990222
.9000%4 .0%9+> .00%9> .99+9 .99%90
.903239 .291> .+432> .99423 .99439
.9%424 .+330> .0419> .9922%9 .9919%+
.9+90 .900%4> 1.32+> .909094 .90940+
.9+1+4 .01342> .04%02> .90041 .903%2
.9%12%9 .0++++> .0909> .90%+1 .90%4
.94439 .9902> 1.341+> .90313 .90242
.93%9+% 1.+4> 1.143> .90%09 .9902
.92409 1.3+314> 1.42+++> .9111 .9+191
.9131 1.3300> 1.409> .9301+ .9229
.9243 1.+313> 1.29+> .9+902 .9+049%
.09+42 1.%+4+> 1.114%> .9+219 .9+%+
.000134 1.%2%30> 1.+1419> .9+3%4 .9+1042
.002%2 1.124> 1.030%> .9%91+3 .9%2%0
.0+02%1 1.3903> 1.409> .9%%4 .9%3+%+
8al"e 6Yen7 off d;"sted "r&e F
-
7/25/2019 Ch 9 Cross Currency
99/107
@et 8al"e 6USD7 F
8al"e 6Yen7 off Unad;"sted "r&e F
)han!e in &al"ation off the "r&es
otal han!e in &al"ation off the "r&es
-
7/25/2019 Ch 9 Cross Currency
100/107
6ew Aal*ation
1. he ori!inal prinipals 2. e$alaned
Y ashflows
USD Y
ashflows ashflows ))*S mar!in )'(s
on delta-'5
I1J I2J I3J
-%K344K+0+K%93-%3K313 19K012K00% 29K4+K%31 -%94K%9+
-%0+K+0+ 24K40K20+ 3+K+4%K942 -+14K+39
-%1K30 21K9K321 31K++4K44 -+14K+39
-01K201 22K%K00+ 33K02K223 -+20K1
-%2K%9% 2+K+2+K2 39K9%K%+1 -%01K23%
-0%%K022 23K30%K4+ 3%K11K21 -+14K+39
-1K91K32% 2%K3%K%4 30K90K43 -+20K1
-2K30 20K1%K%1 42K19+K94+ -+K9%0
-9K120 20K9%K30 43K232K94 -%0K91+
-1K2+K20+ 39K19%K233 %0K04+K+++ -+20K1
-1K213K944 3K29K211 %%K90+K%1 -+K9%0
-1K21%K%% 4%K32K33 +0K%3K29% -+K9%0
-+99K+2 29K+0K3%3 44K%+1K202 -+K9%0
-930K00 42K31%K922 +3K%31K904 -+K9%0
-1K12%K190 49K40K99 4K20+K431 -+14K+39
-11K1%1K0+ 1K+99K419K14% 1+K+3K019K29+ -+14K+39
1K+%+K3+%K12 1K+%4K492K%2% -9K%%3K243
-
7/25/2019 Ch 9 Cross Currency
101/107
-33717+3 -33K409K2
1K+9K11K1++ 1K+00K32K93% -9K%+1K+0
-22K0+K+4 -34K24K41 0K%2+
-11K42%K02
-
7/25/2019 Ch 9 Cross Currency
102/107
@et Y
ashflows
-,7327$17#1,29K4+K%31
3+K+4%K942
31K++4K44
33K02K223
39K9%K%+1
3%K11K21
30K90K43
42K19+K94+
43K232K94
%0K04+K+++
%%K90+K%1
+0K%3K29%
44K%+1K202
+3K%31K904
4K20+K431
1+K+3K019K29+
1K+%+K3+%K12
-
7/25/2019 Ch 9 Cross Currency
103/107
-33717+3
-
7/25/2019 Ch 9 Cross Currency
104/107
9.22: Swain) a re0erse d*al (*rren(y
heoretial YenC< forward rate F %0.99 1.%0>
Yen rinipal F 1$n
USD prinipal F 1 m
?at"rit# F 3. #ears
o"pon 6Yen7 F %.+%> @@
redemption 6UD7 F 1
USD USD df(s Yen Yen UD UD *ond *ond
data data df(s data df(s dates Yen
I1J
2+-"n-9+ 1 1 1 H 2+-"n-9+ 1KKK
2+-De-9+ %.%> .91+1 H
2+-"n-9 +.1%+> .9412% 1.1%+> .900413 1.41> .9%%1 H 2+-"n-9 -%+%KK
H
2+-"n-90 +.%%> .0911 1.419> .9+102 1.0> .01293 H 2+-"n-90 -%+%KK
H
2+-"n-99 +.+> .0199% 1.+> .930203 11.2%> .240% H 2+-"n-99 -%+%KK
H
8 of $ond ashflows 0K3+4K9%9K2
8 USD7 F +K+02K9
@et 8 6USD7
-
7/25/2019 Ch 9 Cross Currency
105/107
9.23: Swain) a d*al (*rren(y
-
7/25/2019 Ch 9 Cross Currency
106/107
9 2 @ i i , Y USD diff i h 4 i < h 1
-
7/25/2019 Ch 9 Cross Currency
107/107
9.2,: @ri(in) a , year Yen-USD ?*anto diff swa with 4on0e&ity - .909923 -%4K413K299 2.+%+> 1.4% 2.++0> 11
1 +-"!-9 .%3 .39> .90+1%1 -3K1+9K93 2.%40> 1.91 2.%1> +
1.% 0-'e$-1 .%1 .+94> .9024+2 -3%K04K%91 2.9%> 1.13+ 2.033> 19
2 +-"!-1 .49 .909> .94+ -49K1K22% 3.310> 1.102 3.30> 4+
2.% -'e$-11 .%14 1.21> .91212 -+2K101K+%4 3.+99> 1.22 3.03> +03 0-"!-11 .%+ 1.30> .9+4%%4 -++K139K%3 3.90> 1.24 4.1%> 9
3.% +-'e$-12 .%+ 1.34> .9%%4 -+9K4+%K22 4.11> 1.32 4.249> 9
4 +-"!-12 .%+ 1.43%> .9%2%% -2K%+3K449 4.3%%> 1.3+ 4.%1%> 14
4.% +-'e$-13 .%11 1.%+3> .94234 -9K094K%92 4.%02> 1.413 4.1> 110
8 6Yen7 on 1 $n nominal F -%%%K20K331 %%%
@et 8 F
-50
0