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International markets and foreign exchange operations - Savluk M.І.

11.1.2. Forward rate

The forward rate is not є predicted by the spot rate, but less than the image of foreign exchange rates and interest rates on the market at the date of the forward forward settlement.

Forward Contracts є Larger Instruments for Deposit Market. The forward exchange rate, which is fixed when the contract is settled, is based on the spot exchange rate on the date of deposit, on the forward point, which is called “premium ” (pm) or “discount” (dis) (it’s fall asleep when the exchange rate is reached) spot chi vidnimayutsya), so as to lay down vid reznitsі interest rates for currencies, scho take part in the contract.

Premium / discount for the formula:

Premium discount discount

de S - spot rate;

D R - interest rate hiker (interest rate of quoted currency - interest rate of quoted basis);

D - number of days per period;

B - the basic number of days at the rosts (360 abo 365);

Rb is the interest rate of the quoted base.

As a rule, the interest rate for the currency, the base is quoted, the rate for the interest rate for the currency is quoted, then the forward rate will be lower for the spot rate, forwards and forwards will be lower for the spot rate (the currency will be quoted for forward).

If the interest rate for the currency is the same as the base for quoting, lower for the interest rate for the currency for quoting, then the forward rate will be higher for the spot rate (the currency will be quoted on the forward market with premium).

Since interest rates are the base currency and the currency is quoted, then the forward rate is more expensive than the spot rate on the date of the placement.

Applied. For 1 quarter per market such exchange rate * 2 and interest rates1 are quoted:

* 2: {For the sake of simplicity, we consider the average interest rate, not the bid / offer margin.}

GBP / USD 1.4745;

GBP 3 m - 5.8%;

USD 3 m - 6.5%.

Rosrahuєmo course for a three-month forward contract.

The currency quoted in this appendix is ​​the US dollar, and the quoted currency is the British pound sterling. The interest rate for the dollar for the interest rate for the pounds, the same, for this application the dollar will be quoted with the premium:

Forward rate

The forward rate of the road is 1.4745 + 0.0025 = 1.4770.

Yak Bulo is designated, the basis of the forward contract is the operation of the deposit market. Klіnt a bank - an importer - you can save yourself a currency exchange rate, a quick rinse deposit: you have to pay your foreign currency on a deposit day, and you have to pay a foreign currency deposit. As an alternative, an exporter of brains in a contract will hold a foreign currency, you can get rid of foreign currency exchange in such a way: recognize a position in foreign currency and convert it into a national currency, as well as deposit. According to the terminology for the credit of the customer, the turn is taken for the currency of foreign currency gained for the export of products. Revenues of aborting the price of such a hedge of depositing the interest rate for currencies. Ale slіd mean, for an exporter or an importer, let’s say that it’s a hassle to exchange currency, rather than gaining a speculative profit for a share of open interest rates on open markets.

An alternative to hedgehog, a cherished food, is forward-pleasing. The forward rate is stocked up at the spot rate and interest rate. For the sake of income, as a result of income in foreign currency, buy a spot rate and invest in a deposit on the singing term, which is a percentage of the rate for a currency that is sold and sold for a spot rate.

It is necessary to put, on the basis of forward operations, the operational risk of deposits.

Klіnt bank - company, scho zdіysnyuє export-import dіyalnіst. The company imports to the USA and exports to Nimechchina. In this way, the company will wipe the money out in Euro, and the payment will be in US dollars. Obviously, after three months, companies need to pay $ 10,000,000. USA.

It is permissible that at the date of disposal, please take a look at the situation like this:


Three percent interest rates

Spot rate * 3


4.0% pa


5.8% pa

EUR / USD 1.0000

* 3: {For the sake of simplicity, we consider the average interest rate, not the bid / offer margin.}

Quite simply, the company can overstate its position in a closed account, and if the payment is due, buy the US dollars for euro for the spot rate. Ale, as a company, you want to get rid of currency exchange, there’s one more way, one of two options:

  • in the first place, the company may take a 10,000,000 Euro position, convert it into a dollar, and add a three-month deposit to the dollar. According to the terminated deposit, you have to pay for your goiters to your trading partners in dollars, and repay the posic for a rachunny in Euro.
  • in a different way, a company can put forward forward to buy US dollars for Euro.

Butt. 1. Vipadok with market deposit:

Klіnt the envelope є euro in dolari for the course of 1,000, vitrati on a loan in дор euro more expensive:

1,000,000 • 4.0 • 90/360 • 100 = 10,000.

Upon completion of the term for the loan sum, it is correlated to the interest rate, if such:

1,000,000 + 10,000 = 1,010,000.

Income from a deposit with US dollars is more expensive:

1,000,000 • 5.8 • 90/360 • 100 = 14,500.

Pislya zakіnchenchennya terminu deposit sum, adjusted for interest income, dearly:

1,000,000 + 14,500 = 1,014,500.

As long as the total amount is, then the EUR / USD rate is more expensive:

1 014 500/1 010 000 = 1,004 455.

2. Hedgefare forward contract.

The course of the forward contract for three months of the road:

Forward contract rate

From now on, the effect of deposit and forward є land is the same, however, to bring about the forward contract as a better investment tool in foreign currency.

Zrozumіlo, but on the date of the weekend, please tell me the spot exchange rate (I, as a rule, will) be higher than the rate of the contract, one side of the contract should be reimbursed, you should buy fragments of foreign currency by the price, we will lower the price . Ale a client to the Bazha Bank, even at the time of the contract completion for the third-party trading operation to secure its due payment. The company doesn’t put a profit for the meta for the profit of the exchange rate seller, but rather reckons to protect yourself from any unpleasant exchange rate gains.

The Bank can reserve a position in a separate account, but can only manage to keep a clear view of foreign exchange rates, but save yourself a view of foreign currency exchange, for another option, if you are willing to buy and sell a currency (currency) currency exchange. Slide also means, that the concession of the forward forward оди is unpaid, because the client doesn’t pay the bank the commission, but be-the-win winery. In this way, Dzherel a profit to the bank for forward operations є reznitsya at the rate of purchase and sale (spread).

At a quoted forward rate, such as at a quoted exchange rate and interest rates, the same standard value is used.

For example, quoting the three-month forward exchange rate of the US dollar to the British pound sterling matime such a wiggle:

GBP / USD 3m fwd 1.4538.

Yak currency rates, so interest rates may vary on both sides of the bidding - bid and offer, the same way, there is a risk of double-sided bidding for the forward exchange rate, and you need to pay the rate of exchange for the following exchange rates:

interest rate currencies quoted

interest rate

de S - spot rate (bid and offer offer);

RC - interest rate of the quoted currency (bid and offer);

RB is the interest rate of the quoted bid base (bid and offer bid);

D - number of days at the period;

B - 360 abo 365.

Rosrahuєmo on the application quotation bid and offer.

Butt. Do not go to the spot market, such currencies and interest rates are quoted:

USD / UAH 5.4910 - 5.4940,

USD 1m 5.5 - 6% pa,

UAH 1m 15 - 16% pa

Rosrahuєmo forward rate USD / UAH for one month:

quotation bid that offer

interest rates

side of quotation

forward points bid

USD / UAH 1m fwd 5.5314 - 5.5412.

Check out the forward rate for such a viglyad:

EUR / USD 0.9530 - 0.9540,

1m fwd 10 20.

Tobto Bank quoted spot rate and forward points.

Mostly forward bid points are higher for the forward offer points, then the maximum discount, as a rule, the lower bid for offer is the premium.

At the induced attachment, the bid item is lower than the offer item, so that it is quoted before Euro with premium.

Brought to you.

It is permissible, what is the minimum discount and the price for such minds the one-month forward exchange rate of the US dollar to Euro:

Bid offer

0.9530 0.9540


Prote sides kotiruvannya can not be the same but, in the same way, in this video, there’s a maximum prize:

Bid offer

0.9530 0.9540

side of quotationforward points