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frolloos


Total Posts: 49
Joined: Dec 2007
 
Posted: 2018-01-08 06:44
I'm more familiar with EQDs than IRDs, hence the following basic question:

What is the effective/value date of a cross currency swap if one floating leg has effective date say T+2 and the other T+1 where T=today. Does the effective date of the CCS follow the convention of the collateral currency (mostly USD)?

Thanks.

Martinghoul


Total Posts: 866
Joined: Oct 2008
 
Posted: 2018-01-08 11:57
Based on what I can see, it seems to apply the longer of the two lags...

Insofar as I may be heard by anything, which may or may not care what I say, I ask, if it matters, that you be forgiven for anything you may have done or failed to do which requires forgiveness...

frolloos


Total Posts: 49
Joined: Dec 2007
 
Posted: 2018-01-08 13:02
Thanks Martinghoul.

So let's say I observe CCY prices today for the pair USD/GBP. USD is the collateral currency, and is T+2. I think GBP is T+0 or T+1 but in any case less lag than USD.

I'd like to back out the USD CSA discount curve for GBP. Then I suppose the correct GBP projection curve that I need to use in the CSA curve construction is not the GBP projection curve I observe today, but tomorrow's projection curve *implied* by today's GBP curve(s)? (Because in that case effectively both start at T+2 except one is based on today's actual curve and the other is based on tomorrow's curve implied by today's curve.)

Martinghoul


Total Posts: 866
Joined: Oct 2008
 
Posted: 2018-01-08 18:59
Yes, I think that's right, although I am not really sure what the distinction is between extracting a forward rate for the appropriate date from today's curve vs extracting same from a forward curve implied by today's curve...

Insofar as I may be heard by anything, which may or may not care what I say, I ask, if it matters, that you be forgiven for anything you may have done or failed to do which requires forgiveness...

frolloos


Total Posts: 49
Joined: Dec 2007
 
Posted: 2018-01-09 01:41
No difference. "Extracting a forward rate for the appropriate date from today's curve" is indeed a clearer way of putting it.
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