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  • May 11, 2022
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Cross-Currency Inflation Swap

An inflation-indexed swap that is combined with a cross currency swap. This swap entails the exchange of two different cash flows, each denominated in a different currency and indexed to inflation rate in that currency. For example, a cross-currency inflation-indexed swap may consist of two legs: one denominated in US dollar, and the other in Mexican peso (MXN), with payments being physically exchanged. The two principals are exchanged at inception and maturity, using an initial USD/MXN spot rate (or USD/UDI spot rate1). The rates could be 6-month USD LIBOR and fixed UDI, with a count convention of ACT/360 on both legs.


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