Long term ECB loan hedging cost
Written by QuantArt Market
Forex Hedging | 10 min Read
Updated on : 25th March 2021
Please find below the pricing.
Spot Reference: 72.50
| Month | Mar-22 | 1 | 0.02 |
|---|---|---|---|
| Sl. No. | Strategy name | Cost | Annualized % |
| 1 | Forward | 3.8725 | 5.25% |
| 2 | Plain Call strike at 72.5 | 4.183491211 | 5.84% |
| 3 | Plain Call strike at 76.5 | 2.044210596 | 2.86% |
| 4 | Call Spread (Buy Call at 72.5/ Sell Call at 76) | 1.988562693 | 2.78% |
| 5 | Call Spread (Buy Call at 72.5/ Sell Call at 77) | 2.333585785 | 3.26% |
| 6 | Call Spread (Buy Call at 72.5/ Sell Call at 78) | 2.630052529 | 3.67% |
| 7 | Capped Forward (72.5 to 76) | 1.491763378 | 2.08% |
| 8 | Capped Forward (72.5 to 77) | 1.836786469 | 2.57% |
| 9 | Capped Forward (72.5 to 78) | 2.133253214 | 2.98% |
| Month | Mar-23 | 1 | |
|---|---|---|---|
| Sl. No. | Strategy name | Cost | Annualized % |
| 1 | Forward | 7.641245737 | 5.06% |
| 2 | Plain Call strike at 72.5 | 7.267663164 | 5.26% |
| 3 | Plain Call strike at 80 | 3.196075244 | 2.31% |
| 4 | Call Spread (Buy Call at 72.5/ Sell Call at 77) | 2.882957839 | 2.08% |
| 5 | Call Spread (Buy Call at 72.5/ Sell Call at 78) | 3.350716191 | 2.42% |
| 6 | Call Spread (Buy Call at 72.5/ Sell Call at 79) | 3.749607881 | 2.71% |
| 7 | Capped Forward (72.5 to 77) | 2.506214442 | 1.81% |
| 8 | Capped Forward (72.5 to 78) | 2.973972794 | 2.15% |
| 9 | Capped Forward (72.5 to 79) | 3.372864483 | 2.44% |
| Month | Mar-24 | 1 | |
|---|---|---|---|
| Sl. No. | Strategy name | Cost | Annualized % |
| 1 | Forward | 11.65901102 | 4.99% |
| 2 | Plain Call strike at 72.5 | 10.16279683 | 5.07% |
| 3 | Plain Call strike at 84 | 4.074834871 | 2.03% |
| 4 | Call Spread (Buy Call at 72.5/ Sell Call at 78) | 3.67583494 | 1.83% |
| 5 | Call Spread (Buy Call at 72.5/ Sell Call at 80) | 4.617076485 | 2.30% |
| 6 | Call Spread (Buy Call at 72.5/ Sell Call at 83) | 5.796687976 | 2.89% |
| 7 | Capped Forward (72.5 to 78) | 3.423143932 | 1.71% |
| 8 | Capped Forward (72.5 to 80) | 4.364385477 | 2.18% |
| 9 | Capped Forward (72.5 to 83) | 5.543996968 | 2.77% |
| Month | Mar-25 | 1 | |
|---|---|---|---|
| Sl. No. | Strategy name | Cost | Annualized % |
| 1 | Forward | 15.64383377 | 4.87% |
| 2 | Plain Call strike at 72.5 | 12.70218898 | 4.93% |
| 3 | Plain Call strike at 88 | 5.046479848 | 1.96% |
| 4 | Call Spread (Buy Call at 72.5/ Sell Call at 81) | 5.125721197 | 1.99% |
| 5 | Call Spread (Buy Call at 72.5/ Sell Call at 83) | 5.9704977 | 2.32% |
| 6 | Call Spread (Buy Call at 72.5/ Sell Call at 85) | 6.725081969 | 2.61% |
| 7 | Capped Forward (72.5 to 81) | 4.913440871 | 1.91% |
| 8 | Capped Forward (72.5 to 83) | 5.758217374 | 2.24% |
| 9 | Capped Forward (72.5 to 85) | 6.512801643 | 2.53% |
| Month | Mar-26 | 1 | |
|---|---|---|---|
| Sl. No. | Strategy name | Cost | Annualized % |
| 1 | Forward | 19.81858054 | 4.77% |
| 2 | Plain Call strike at 72.5 | 14.970264 | 4.83% |
| 3 | Plain Call strike at 92.5 | 5.791285969 | 1.87% |
| 4 | Call Spread (Buy Call at 72.5/ Sell Call at 81) | 5.047388058 | 1.63% |
| 5 | Call Spread (Buy Call at 72.5/ Sell Call at 83) | 5.943418362 | 1.92% |
| 6 | Call Spread (Buy Call at 72.5/ Sell Call at 85) | 6.759846627 | 2.18% |
| 7 | Call Spread (Buy Call at 72.5/ Sell Call at 88) | 7.852732112 | 2.53% |
| 8 | Capped Forward (72.5 to 81) | 4.866533714 | 1.57% |
| 9 | Capped Forward (72.5 to 83) | 5.762564017 | 1.86% |
| 10 | Capped Forward (72.5 to 85) | 6.578992283 | 0.021206856 |
| Month | Mar-28 | 1 | |
|---|---|---|---|
| Sl. No. | Strategy name | Cost | Annualized % |
| 1 | Forward | 29.3208388 | 4.71% |
| 2 | Plain Call strike at 72.5 | 19.08509943 | 4.74% |
| 3 | Plain Call strike at 102 | 7.163386387 | 1.78% |
| 4 | Call Spread (Buy Call at 72.5/ Sell Call at 83) | 5.62580918 | 1.40% |
| 5 | Call Spread (Buy Call at 72.5/ Sell Call at 85) | 6.492890914 | 1.61% |
| 6 | Call Spread (Buy Call at 72.5/ Sell Call at 88) | 7.692372818 | 1.91% |
| 7 | Call Spread (Buy Call at 72.5/ Sell Call at 93) | 9.4507506 | 2.35% |
| 8 | Capped Forward (72.5 to 83) | 5.50665879 | 1.37% |
| 9 | Capped Forward (72.5 to 85) | 6.373740524 | 1.58% |
| 10 | Capped Forward (72.5 to 88) | 7.573222428 | 0.018808636 |
| Month | Mar-31 | 1 | |
|---|---|---|---|
| Sl. No. | Strategy name | Cost | Annualized % |
| 1 | Forward | 43.31908827 | 4.37% |
| 2 | Plain Call strike at 72.5 | 22.90140397 | 4.46% |
| 3 | Plain Call strike at 116 | 8.504106855 | 1.65% |
| 4 | Call Spread (Buy Call at 72.5/ Sell Call at 85) | 5.614263352 | 1.09% |
| 5 | Call Spread (Buy Call at 72.5/ Sell Call at 88) | 6.759041476 | 1.32% |
| 6 | Call Spread (Buy Call at 72.5/ Sell Call at 93) | 8.507378525 | 1.66% |
| 7 | Call Spread (Buy Call at 72.5/ Sell Call at 99) | 10.365519 | 2.02% |
| 8 | Capped Forward (72.5 to 85) | 5.532293142 | 1.08% |
| 9 | Capped Forward (72.5 to 88) | 6.677071266 | 1.30% |
| 10 | Capped Forward (72.5 to 93) | 8.425408316 | 0.016394473 |
Long term – IRS, POS, COS & CCS
Please find below the IRS, POS, COS & CCS for 1 to 10 years
| 1Y | 2Y | 3Y | 4Y | 5Y | 7Y | 10Y | |
|---|---|---|---|---|---|---|---|
| IRS | 2.19% | 2.20% | 2.25% | 2.35% | 2.47% | 2.47% | 2.47% |
| POS | 2.13% | 4.68% | 4.88% | 4.86% | 4.81% | 4.73% | 4.29% |
| COS | 2.25% | 2.33% | 2.45% | 2.62% | 2.83% | 2.95% | 2.24% |
| CCS | 4.39% | 7.01% | 7.33% | 7.48% | 7.64% | 7.68% | 6.54% |
**Assumed USD 3M Libor + 2% Spread