Swap points and interest rate differentials are two views of one number
Table of Contents
1. Summary
Swap points and an interest rate differential determine each other through parity. Brokers derive the bid and ask interest rates of a currency from swap points quoted by banks. A system can hold either one and derive the other.
2. Detail
Open question. Should ORE Studio let a user key swap points, derive them only, or configure this by pair? It derives them today.
3. See also
- FX forwards — the structure note.
- Forward points follow from two money market rates — completes: the formula in each direction.
- ORE Studio publishes FX forwards derived from published curves — answers: ORE Studio takes the derived option.