About Cross Currency Swap
The contract between 2 parties to exchange principal and interest rates for 2 different currencies for a certain period.
Just like the IRS, in addition to the interest rate that will be exchanged which is fixed rate to floating rate, the interest exchange can also be done for fixed vs. fixed and floating vs. floating, because CCS involves 2 different currencies.
In addition, CCS also includes principal exchanges at the beginning and end of the transaction.
The main reason Customers want to do CCS transactions is to get funds in different currencies, so that by doing CCS, the customer can exchange funds in a currency he has at this time with funds in other currencies needed. Upon maturity, the funds will be exchanged back into funds in the original currency.
Just like the IRS, in addition to the interest rate that will be exchanged which is fixed rate to floating rate, the interest exchange can also be done for fixed vs. fixed and floating vs. floating, because CCS involves 2 different currencies.
In addition, CCS also includes principal exchanges at the beginning and end of the transaction.
The main reason Customers want to do CCS transactions is to get funds in different currencies, so that by doing CCS, the customer can exchange funds in a currency he has at this time with funds in other currencies needed. Upon maturity, the funds will be exchanged back into funds in the original currency.
Cross Currency Swap (IDR Funding)
- Initially, the Customer has a USD loan with a floating interest rate.
- Customers need funds in IDR currency.
- To achieve this objective, the Customer will carry out CCS as follows:
- Exchange of initial principal: Give USD principal and receive IDR principal.
- Payment of interest rates: Pay IDR interest and receive USD interest.
- Final principal exchange: Give IDR principal and receive USD principal.
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