Cross-Currency Interest Rate Swap Application in the Long-Term Currency Risk Management

Piotr Wybieralski


Effective currency risk management using various derivatives is particularly important under increased market volatility. The risk is relatively higher for longer than shorter time frames. This study highlights the implementation of selected instruments for long-term hedging. It presents the application of cross-currency interest rate swap as a currency risk hedging tool used by Polish exporters, mainly manufacturers generating their revenues mostly abroad (in euro area), exposed to negative exchange rate fluctuations. The paper covers issues related to the pricing, market risk estimation and collateral required in the OTC market, as well as undertakes a sensitivity analysis in search for exchange rates at which margin call occurs. There is a comparative analysis and back test simulation conducted using market data from exchange and money markets. The study emphasized that the analyzed instrument meets the expectations in terms of hedging the company cash flows, as well as may generate additional benefits due to the still existing interest rate differential.
Author Piotr Wybieralski (WGM / KFM)
Piotr Wybieralski,,
- Department of International Finance
Journal seriesAnnales Universitatis Mariae Curie-Skłodowska, Sectio H Oeconomia, [Annales Universitatis Mariae Curie-Skłodowska, Sectio H Oeconomia], ISSN 0459-9586, e-ISSN 2449-8513, (N/A 20 pkt)
Issue year2020
Publication size in sheets0.55
Keywords in Polishzarządzanie ryzykiem kursowym, swap procentowo-walutowy, zabezpieczenie w długim terminie
Keywords in Englishcurrency risk management, cross-currency interest rate swap, long-term hedging
Languageen angielski
Score (nominal)20
Score sourcejournalList
ScoreMinisterial score = 20.0, 07-07-2020, ArticleFromJournal
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