FX Forward
FX Forward
FX Forward
Michael Taylor
FinPricing
https://finpricing.com/curveVolList.html
Currency Forward
Summary
Currency Forward or FX Forward Introduction
The Use of Currency Forwards
Forex Market Convention
Forward FX Rate
Valuation
A Real World Example
Currency Forward
Forward FX Rate
Given spot rate , spot date and forward date T, the FX forward rate can be
represented as
where
the spot FX rate quoted as base/quote
t the valuation date
the spot date (several days after the valuation date)
T the forward date
the discount factor of base currency
the discount factor of quote currency
Currency Forward
Valuation
The present value of an FX forward contract is given by
where
t the valuation date
T the payment date
the spot FX rate quoted as base/quote
the discount factor of base currency
the discount factor of quote currency
the notional principal amount for base currency
the notional principal amount for quote currency
Currency Forward
Quotation USD/CNY