Cross Currency Swaption
A Cross Currency European Swaption gives the holder the option to enter into a swap to exchange cash flows in two different currencies. The domestic and foreign swap leg cash flows can be fixed or floating.
Let the domestic and foreign daycount fractions be defined, respectively, as
Let the present values, at time T, of the domestic and foreign fixed leg cash flows be respectively defined as
Let the present values, at time T, of the domestic and foreign floating leg cash flows be respectively defined as
We define the domestic and foreign PVBP factors, respectively, as.
and the domestic and foreign vanilla swap rates, respectively, as.
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