Implementación del Cross Currency SWAP desde su enfoque financiero: la valoración

Abstract

The growth and dynamics of long term debt in foreign currency, by Colombian companies, has been increasing the need for hedging tools. The context for dollar low interest rates, an important achievement of Colombian companies, a larger appetite for foreign investors and an easier access to international markets, have allowed to increase the long term debt to local companies and their needs have turned towards a long term hedging of fluxes(larger than one year) The adequate instrument for hedge flow is called “swap”, and for the case of an interchange of a dollar flow at a variable rate (generally libor) for a pesos flow (implicit fixed rate) it is called “cross Currency Swap”. There exist various types of currency Swaps (as it is pointed out by the Colombian regulations) but we restrict ourselves to the standard Swap which is negotiated in international markets. The Standard is a Swap in which a labor rate in dollars is exchanged for fixed rate in pesos. The present study aims to find a deductive form, taking into account the market regulations, and methodology to evaluate the “Cross Currency Swap”. The first part consists of a brief explanation of the necessity, the context and the product.In the second part, the flows subject to exchange are identified, and based on them the necessity to construct two curves for flow discount is established. For the libor flow, we must construct a libor curve starting from the most accurate quote; that is, a 3-month quotes. For the pesos flow, the curve of implicit rates constructed from the forward accounting between 0 and one year and from the “Cross Currency Swap” quotation for the term between 1 and 10 years. Finally, through a least squared reduction and an iterative circular reference in Excel it is possible to find the discount factors for each of the future dates, allowing the evaluation of a “Cross Currency Swap” operation or flow.