You have following quotes from Bank A and Bank B:
Calculate:
- How much minimum CHF amount you have to pay for 1 Million GBP spot?
- Considering the quotes from Bank A only, for GBP/CHF what are the Implied Swap points for Spot over 3 months?
Solution
- To BUY 1 Million GBP Spot against CHF
- First to BUY USD against CHF at the cheaper rate i.e. from Bank A. 1 USD = CHF 1.4655
- Then to BUY GBP against USD at a cheaper rate i.e. from Bank B 1 GBP= USD 1.7650
By applying Cross Rate Buying rate would be 1 GBP = 1.7650 * 1.4655 CHF
1 GBP = CHF 2.5866
Amount payable CHF 2.5866 Million or CHF 25,86,600
- Spot rate Bid rate GBP 1 = CHF 1.4650 * 1.7645 = CHF 2.5850 Offer rate GBP 1 = CHF 1.4655 * 1.7660 = CHF 2.5881 GBP / USD 3 months swap points are at discount
Outright 3 Months forward rate GBP 1 = USD 1.7620 / 1.7640 USD / CHF 3 months swap points are at premium
Outright 3 Months forward rate USD 1 = CHF 1.4655 / 1.4665 Hence
Outright 3 Months forward rate GBP 1 = CHF 2.5822 / 2.5869 Spot rate GBP 1 =CHF2.5850 / 2.5881
Therefore 3 month swap points are at discount of 28/12
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