## Online Finance – Pricing a Cross Currency Swap – Floating for Floating structure

*in*Derivatives

## Floating for Floating Currency Swap

For our pricing example most of the assumptions will be the same as that used in the example for fixed for fixed floating currency swap above except for the interest rates used to calculate the floating rate payments. Let us assume that the floating interest rate payments for the USD leg is based on the US LIBOR and the floating interest rate payments for the Yen leg is based on the JPY LIBOR plus a spread of 80 basis points. As in the case of floating for floating interest rate swaps discussed earlier the swap will be valued assuming that the forward rates implicit in the zero curve on the valuation date will be realized.

The results are given in the worksheet below. Just a few notes on the results:

- The forward rates that are used in the floating rates payments (FC) are derived from the interpolated zero coupon rates (ZC) using the applicable formula. For example for the period ended 1/1/2012, the forward rate for USD was calculated as follows:

- The floating leg payments will be equal to the forward rate (+ spread if applicable) * Notional Amount. For example for the period ended 1/1/2012, the yen cash flow is calculated as (0.501%+0.80%)*910000000=11,840,543 yen. The dollar value will be this amount * the forward exchange rate = 11840543*0.01110=USD131,463.

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