To demonstrate how these swap points are applied, let us look at two transactions:
- Short-dated swaps
- Short-dated outrights
Short-Dated Swaps
Suppose that the treasurer of a German manufacturing company establishes that it needs to borrow USD from today until spot and has a surplus of EUR for the same period. The treasurer might like to transact a today/ordinary swap that sees the company sell EUR to the bank and receive the equivalent amount of USD for two days.
The market prices are as follows: