Yield Curve Fxb
Yield Curve Fxb is a of with functions , keys and example object that represents market rates of cross currency basis swap contracts - i.e. objects of type - that may be used as input to a yield curve construction.
Web blog example here
Note the current implementation supports only ibor-ibor and oi-oi swaps. Fixed-ibor swaps can be also processed by setting the appropriate ibor multiplier to 0.
Technically, the mentioned curve is created by feeding an object of this type as value next to the key in the formula that creates the object.
We refer to the known curve entered in Src Disc Crv as the sourcecurve and denote its associated currency with SRC and the curve being built here as the target curve and denote its associated currency with TGT
Concretely, an object of type Yield Curve Fxb holds the market quoted basis spreads of cross currency basis swaps between SRC and TGT
The discount factors of the target curve are then constructed in such a way that all these swaps have zero NPV.
The SRC discounting curve and the spot fx rate must be supplied as exogenous inputs.
Optionally, a SRC forecasting curve may be also supplied, which would then replace the given SRC discounting curve in predicting the future fixings of the source ibor index.
Similarly, a TGT forecasting curve may be also optionally supplied, which would then be used in lieu of the produced TGT discounting curve in predicting the future fixings of the target ibor index.