6 Things Every Treasury Practitioner Should Know About Cross Currency Swaps

January 24, 2013

Complex yet fairly common financial instruments, cross currency swaps offer many advantages as hedging tools. Treasurers of multinational companies typically use cross currency swaps to manage operational interest rate and currency risks in their global businesses, or to facilitate multi-currency capital structure optimization.Because of the broad applicability of cross currency swaps, corporates from every sector employ them for risk management. But since they blend multiple components of different markets, spanning interest rate as well as foreign exchange, cross currency swaps can be daunting and complex to understand, transact and manage. In this paper, we distill the critical concepts of cross currency swaps, from why companies choose to hedge with them to how they are structured, priced and valued.

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