An Australian company requires USD but does not have access to direct USD borrowing or finds it prohibitively expensive. The company decides to borrow in Australian dollar at 90-day BBSW and enter a cross-currency basis swap to USD based on 90-day USD LIBOR (a floating-for-floating swap). The swap has a tenor of two years with the quarterly settlement. The principal on the Australian dollar loan is AUD50 million and the exchange rate at the initiation of the swap is AUD 1 = 0.7231 USD. 

Show using diagrams the swap at initiation, the quarterly interest payment, and the swap at maturity.

Answer rating: 100% (QA)

Crosscurrency swaps are an overthe counter OTC derivative in the fo... View the full answer