Cross Currency Swap Theory & Practice - An Illustrated Step-by-Step Guide of How to Price Cross Currency Swaps and Calculate the Basis Spread

A Cross Currency Swap (CCS) is a financial instrument that allows investors to exchange a set of cashflow liabilities for an equivalent set in another currency, often USD. Investors trade CCS to secure cheaper funding, hedge FX exposures, manage liquidity risk and of course for speculative purposes.In this paper we review the CCS product, its features and risks. We show how to price CCS and provide the mathematical formulae with examples & illustrations. Furthermore we outline how to calculate the CCS Basis Spread, which is how CCS are quoted in the financial marketplace