Ppt on forward rate agreement quotes

Chapter 14 Futures Contracts.

seller know each other Customized agreements are negotiated All contract terms can be customized to the requirements of the buyer and seller Forward Contract Forward Price Default Risk Price at which the trade will occur Determined when the agreement made Default Risk Counterparty may/in the future, you are short yen. Looking at the quotes shown above, we saw 2 million yen convert to $18,869.70 at the current spot market exchange rate. Using the 3-month forward rate, 2 million yen would equal $18,969.93, a /


Chapter 8 Foreign Currency Derivatives. 8-2 Foreign Currency Derivatives: Learning Objectives Examine how foreign currency futures are quoted, valued,

to their broker to execute a round turn and only a single price is quoted –Use of a clearing house as a counterparty – All contracts are agreements between the client and the exchange clearing house. Consequently clients need not worry /Speculation Speculating in the forward market –If Hans were to speculate in the forward market, his viewpoint would be that the future spot rate will differ from the forward rate –Today, Hans should purchase Sfr173,611.11 forward six months at the forward quote of $0.5760/


1 Lecture 5 & 6. 2 Learning Goals What is the Foreign Exchange Market? What is an Exchange Rate? What sort of changes an exchange rate could face? The.

specify a value date farther away than two days: 30 days,90 days,180 days,360 days or even several years. The exchange rate in this case is quoted as forward exchange rate and is different than the spot rate. Forward foreign exchange contracts is an agreement at the present beginning by you to buy or sell a specific amount of foreign currency at a certain fixed/


Chapter objective: examines the functions, actual operation of the FOREX markets including exchange rate and international financial markets. Foreign Exchange.

no overlap between the trading time. 3.Spot and Forward Rates, Currency Swaps, Futures and Options (1)spot and forward rates 1)Spot transaction and spot rate 2)forward transaction and forward rate (2)currency swaps (3)foreign exchange futures and options 1) foreign exchange futures 2) foreign exchange options 3.Spot and Forward Rates 1)spot transaction and spot rate Be quoted at specific time,based on large trades Example :the/


Foreign Exchange Derivative Market

rate quotations are available in the financial press and on the Internet with spot exchange rate quotes for immediate delivery Forward exchange rate is for delivery at some specified future point in time Forward premium is the percent annualized appreciation of a currency Forward/ Agreement (1971) among major countries allowed dollar devaluation and widened boundaries around set values for each currency No formal agreements since 1973 to fix exchange rates for major currencies Freely floating exchange rates /


International Parity Conditions

PPP does not hold For example, if there are factors other than inflation that affect exchange rates, the rates will not adjust in accordance with the inflation differential Interest Rates and Exchange Rates The Forward Exchange Rate A forward rate is an exchange rate quoted today for settlement at some future date The forward exchange agreement between currencies states the rate of exchange at which a foreign currency will be bought or sold/


Global foreign exchange market turnover. Foreign Exchange Transactions A foreign exchange market transaction is composed of: spot, outright forward and.

to the Bank of America, the Bank has the following quote for 31days yen forward: 121.32-122.40 In 31 days Nissan delivers the yen and receives $2.8595 million at the ask price of 122.40 Ų/$. Hedging with FRA The forward rate agreement FRA is an over the counter instrument to hedge interest rate risk. Example: Assuming a manufacturing firm wishes to borrow $10/


Chapter 1 Introduction. 1.1 futures contracts A futures contract is an agreement to buy or sell an asset at a certain time in the future for certain price.

contracts in that it is an agreement to buy or sell an asset at a certain time in the future for a certain price. But, whereas futures contracts are traded on exchanges, forward contracts trade in the over-the-counter market. Mostly used for currency trading instead of commodity trade. Foreign Exchange Quotes for USD/GBP exchange rate on July 17, 2009 BIDOFFER SPOT/


0 DERIVATIVES WORKBOOK By Ramon Rabinovitch. 1 DERIVATIVES ARE CONTRACTS Two parties Agreement Underlying security.

FUTURES IS NOTHING MORE THAN A STANDARDIZED FORWARD TRADED ON AN ORGANIZED EXCHANGE. STANDARDIZATION THE COMMODITY TYPE AND QUALITY THE QUANTITY PRICE QUOTES DELIVERY DATES DELIVERY PROCEDURES 5 AN OPTION IS A BILATERAL AGREEMENT IN WHICH ONE PARTY HAS THE RIGHT,/: N = 10 years and r = 12% and P=$100. Thus, P=$100 invested at a 12% annual rate, continuously compounded for ten years will grow to: Continuous compounding yields the highest return to the investor: CompoundingFactor Simple3.105848208 Quarterly3/


FINANCIAL FUTURES, FORWARD RATE AGREEMENTS, AND INTEREST RATE SWAPS

Monetary Market (IMM). The underlying asset is a Eurodollar time deposit with a 3-month maturity. Eurodollar rates are quoted on an interest-bearing basis, assuming a 360-day year. Each Eurodollar futures contract represents $1 million/ a FRA will receive (pay) cash when the actual interest rate at settlement is less than the exercise rate. Forward rate agreements (FRA) While futures and forward contracts are similar, forward contracts differ because they are negotiated between counterparties there is no /


CHAPTER 9 CURRENCY EXCHANGE RATES Presenter’s name Presenter’s title dd Month yyyy.

). Forward contracts, which are agreements for a future exchange at a specified exchange rate. FX swaps, which are a combination of a spot contract and a forward contract, used to roll forward a position in a forward contract/rates will be consistent. FORWARD RATE QUOTATIONS Forward exchange rates are quoted in terms of points (pips: points in percentage). If forward rate > spot rate, the base currency is trading at a forward premium. If forward rate < spot rate, the base currency is trading at a forward/


Derivatives Markets In Interest Rate & Foreign Exchange Rate Utility For Importer & Exporter NEHA ABHISHEK, BANGALORE Batch: 22, (5 th July to 30 th August,

- Rs.307,500 = Rs.36,112,500. Interest Rate Derivatives Over-the-counter (OTC) interest rate derivatives include instruments such as Forward Rate Agreements(FRAS): A Forward Rate Agreement (FRA) is a financial contract between two parties to /rates. Caps, Floors, And Collars: are option-like agreements that require one party to make payments to the other when a stipulated interest rate, most often a specified maturity of LIBOR, moves outside of some predetermined range. Settlement under FRA HDFC Bank quotes/


Foreign Exchange Market. Chapter Outline Function and Structure of the FOREX Market The Spot Market The Forward Market.

Forward Market Forward Rate Quotations Long and Short Forward Positions Forward Cross-Exchange Rates Foreign Exchange Market-Defined Foreign exchange means the money of a foreign country; that is foreign country bank balances,cheques,drafts and banknotes. A foreign exchange transaction is an agreement/Spot(Ask)=$3.0180/BP Relationships Between Bid and Ask prices of the currencies There are two sides of all quotes: Buy and sell(buy dollars against Rs. Sell dollars for Rs.) Example: PNB Spot(Rs./$)(bid/ask)= /


Bond markets Dr.Guru.Raghavan. Bonds The word ‘bond’ means contract, agreement, or guarantees. All these terms are applicable to the securities known.

the US, confusingly high grade corporate bonds are usually quoted in terms of a spread over US Treasury yields at similar maturity; if the/, so that the securities dealer trades money for securities belonging to an investor. Repurchase agreements.. The largest part of the repo market is the overnight market. However, big investors/ levied in the foreign exchange market between forward purchases and sales – which would be expected to reflect the difference in short term interest rates – can widen sharply at times of /


Chapter 11 Forwards and Futures FIXED-INCOME SECURITIES.

Instruments Characteristics of Future Contracts A future contract is an agreement between two parties The characteristics of this contract are /(IP - CP) = Max (futures price x CF – quoted price) Cheapest-to-Deliver (Example) Suppose a future contract /rate, the forward price F 05/01/01 is equal to Forward Pricing – Underlying is a Rate Simply determine the forward rate that can be guaranteed now on a transaction occurring in the future Example –An investor wants now to guarantee the one-year zero-coupon rate/


International Finance FIN456 Michael Dimond. Michael Dimond School of Business Administration Some Basic Interest Rates US Risk-free rate: The yield on.

include forward forwards, forward rate agreements (FRAs), and Eurodollar futures. Michael Dimond School of Business Administration Forward Forwards & FRAs Forward Forward: a contract which fixes an interest rate today on a future loan or deposit. The contract specifies the interest rate, the principal amount of the future deposit or loan, and the start and ending dates of the future interest rate period. Forward forwards have been largely displaced by the forward Rate Agreement (FRA). Forward Rate Agreement/


CURRENCY FUTURES A futures contract, like a forward contract is an agreement between two parties to exchange one asset for another, at a specified date.

CURRENCY FUTURES A futures contract, like a forward contract is an agreement between two parties to exchange one asset for another, at a specified date in the future, at a rate of exchange specified up front. However, there are a number of /- Friday Trading in expiring contracts closes at noon, Chicago time, on the last trading day 30-YEAR T-BOND FUTURES QUOTES Thursday, 4 December ContractLastChangeOpenHighLowPrev. Stl. Dec 08132-310+0-245132-090132-310132-010132-065 Mar 09131-305+0-230130-315131-315130/


Dr. Himanshu Joshi. Spot Rate Determination and Forward Rate Spot rate is simply the price of a unit of foreign currency. Thus it is not surprising that.

forward FX agreement, with obligation to deliver or sell euros, is said to take a short forward position in euros. Long position on one currency is short position on another currecny. Standardized Analysis Analyzing forward /quotes.ubs.com/ click on “Money Market” then on “LIBOR”http://quotes.ubs.com/ Web-Source http://www.global-rates.com/interest- rates/libor/japanese-yen/japanese- yen.aspxhttp://www.global-rates.com/interest- rates/libor/japanese-yen/japanese- yen.aspx LIBOR Quotes Synthetic FX Forwards/


EurexOTC Clear for Interest Rate Swaps

Prisma Client position and collateral transfer Convention of Default Management Committee Close-out netting per framework agreement Portfolio and market evaluation Handling as required for short maturity positions, e.g. by /Forward starting swaps not in scope Max. Maturities UKRPI: 50Y HICPxT / FRCPIx: 30Y Later extension in 2014 to US-CPI: 50Y Indexing Lags 2 - 12 whole months Index Levels Monthly and daily interpolation Market Data via Reuters RICs Member quotes for Par-Swap Rates (intra-day) Member quotes/


FUTURES.

FUTURES Definition Futures are marketable forward contracts. Forward Contracts are agreements to buy or sell a specified asset (commodities, indices, debt securities, currencies, etc.) at an agreed-upon price (f) for purchase or /of a T-bill with a maturity of 91 days and a face value of $1M. Used for speculating on S-T rates and hedging. Prices on T-Bill futures are quoted in terms of the IMM index or discount yield (Rd): Formula to Convert: Eurodollar Futures Eurodollar Futures are similar to T-Bill/


CHAPTER 5 THE FOREIGN EXCHANGE MARKET. CHAPTER OVERVIEW I.INTRODUCTION II.ORGANIZATION OF THE FOREIGN EXCHANGE MARKET III.THE SPOT MARKET IV.THE FORWARD.

of a Forward Contract an agreement between a bank and a customer to deliver a specified amount of currency against another currency at a specified future date and at a fixed exchange rate. THE FORWARD MARKET 2. Purpose of a Forward: Hedging the act of reducing exchange rate risk. THE FORWARD MARKET B.Forward Rate Quotations 1. Two Methods: a.Outright Rate: quoted to commercial customers. b.Swap Rate: quoted in the interbank/


Copyright © 2009 Pearson Prentice Hall. All rights reserved. Chapter 15 Interest Rate and Currency Swaps.

lender and refinance the entire agreementForward Rate Agreements (FRAs) – Trident could lock in the future interest rate payment in much the same way that exchange rates are locked in with forward contracts –Interest Rate Futures –Interest Rate Swaps – Trident could swap the floating rate note for a fixed rate note with a swap dealer Copyright © 2009 Pearson Prentice Hall. All rights reserved. 15-15 Forward Rate Agreements (FRAs) A forward rate agreement is an interbank-traded/


Laurence Booth Sean Cleary. LEARNING OBJECTIVES Forwards, Futures, and Swaps 11 11.1 Describe forward contracts and identify the associated payoffs with.

spectrum of the yield curve, from one year to 30 years, so interest rate exposure can be managed It also links swaps to forward rate agreements (FRAs) FRAs are agreements that use forward rates to manage a firm’s exposure to interest rate risk by borrowing or lending at a specified future date at an interest rate that is fixed today Booth Cleary – 3rd Edition25© John Wiley & Sons Canada/


FUTURES DEFINITION Futures (forward) contracts are agreements betweentwo agents where one agrees to purchase and the other to sell (deliver) a given amount.

Futures (forward) contracts are agreements betweentwo agents/no mark to market - end day settlement allow contingent delivery - sale of house etc. Look at Futures Quotes – www.futures.quote.com QUESTION: Which commodities are likely to have futures traded? (A commodity that can be graded - /. 5.As long as the maturity of the contract is short, even changing interest rates will have little effect on futures versus forward prices. Example: Calculating returns on futures - speculator ASSUME: - It is January -/


Dr. David P. EchevarriaAll Rights Reserved1 International Financial Management Chapter 17 Exchange Rates Forfaiting Rationales for Going Global.

called a forward contract) 1.Forward rate – the exchange rate specified in the forward contract C.If the forward rate is higher than the spot rate, the foreign currency is selling at a premium (when quoted as $ equivalents) D.If the forward rate is lower than the spot rate, the / prices 2.Managing risk a.Enter into a forward agreement to guarantee the exchange rate b.Use foreign currency options to lock in exchange rates if they move against you, but benefit from rates if they move in your favor Dr. David/


© Husch Blackwell LLP NEW YORK/ NEW JERSEY FOREIGN FREIGHT FORWARDERS & BROKERS ASSOCIATION, INC. SEMINAR/ LUNCHEON MEETING JUNE 20, 2012 NEWARK, NJ NRAs:

CONFIRMATION, QUOTE SHEETS, ETC. Notice Requirement: Rules Tariff, bill of lading or other shipping document---September 12: Rules Tariff only-Direct Rule Making * SHIPPER AGREEMENT MUST BE CLEAR * CHARGES CAN BE IN RULES TARIFF OR AS LINE ITEMS IN NRA (QUOTATION) *RATE/CHARGES INCREASES/ever accessed a service contract which you did not sign on your own behalf either as an NVOCC or as an ocean freight forwarder acting on behalf of your principal? Yes [ ] No [ ]. 7.If your answer to number 6 is YES, provide /


Finance Act ,2013 An Overview CA Sanjeev Lalan.

concessional rate of TDS @ 5% in respect of interest on money borrowed by an Indian company in foreign currency and such borrowing is either under a loan agreement or /the recognized association for trading in commodity derivative in accordance with the provisions of the Forward Contracts (Regulation) Act, 1952 (74 of 1952) and the rules, regulations or /by way of compulsory acquisition and also to curb the practise of not quoting PAN or quoting of incorrect PAN with registrar or sub-registrar at the time of /


Forward and Futures. Forward Contracts A forward contract is an agreement to buy or sell an asset at a certain time in the future for a certain price.

delivery price) It can be contrasted with a spot contract which is an agreement to buy or sell immediately It is traded in the OTC market Forward Price The forward price for a contract is the delivery price that would be applicable to the/rate of return on your investment, assuming the amount of investment is the initial margin required? Commodities Futures Trading CME group Monopoly of commodity trading http://www.cmegroup.com/ Homework1 On September 4, 2007, the crude oil futures traded at NYMEX was quoted/


1 Dredging Corporation of India Limited. 2 Disclaimers *Safe Harbor Provision. –This presentation includes statements which may constitute forward-looking.

Although the company believes that the expectations contained in such forward-looking statements are reasonable, it can give no assurance/rate and terms & conditions without resorting to tender First Right of Refusal (RFR) –DCI participates, qualifies technically, and if the lowest foreign bidder quotes Rs.100/- and DCI quotes/service conditions including wages and allowances are regulated as per maritime agreements –Maritime agreements are concluded between INSA and respective maritime unions and are adopted/


Presented to: July 29, 2013 Managing Interest Rate Risk The information contained herein was generated by an employee of PNC Bank’s Derivative Products.

rate quote.  The borrower can accept the rate quote and authorize us to lock in the rate (via telephone, on a recorded telephone line) anytime they desire.  Upon locking the rate, we will generate the Confirmation letter detailing the terms of the agreement/ Rates LIBOR Forward Curve Steepens  As reflected in the graph above and Fed Funds futures, the market believes floating rates will rise sharply from 2015 to 2019; there has been significant movement in the forward curve since May.  Floating rates /


Foreign Exchange Exchange rate is the price of a currency in terms of a foreign currency.

dollar. If the spot rates of USD / HKD = 7.7960 / 70, the forward rates of USD / HKD will be quoted as 250 / 240. Because the convention of the foreign exchange market is to quote the forward rates in terms of “ points ”. Calculation of forward exchange rate The rule is that / of time for the delivery (settlement) of an amount of foreign currency at a predetermined exchange rate. Futures vs Option An option is an agreement between a buyer and a seller by which the buyer has the right to exercise his option,/


Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 5-1 Chapter 5 Factors Affecting Bond Yields and the Term Structure of Interest Rates.

bond B  The normal way that yield spreads are quoted is in terms of basis points.  The yield /agreement (repo) market.  When a portfolio manager wants to borrow funds via a repo agreement, a dealer provides the funds.  The interest rate charged by the dealer is called the repo rate.  There is not one repo rate but a structure of rates/Rates (continued)  Forward Rate as a Hedgeable Rate  A natural question about forward rates is how well they do at predicting future interest rates.  The forward rate/


Forward and Futures. Forward Contracts A forward contract is an agreement to buy or sell an asset at a certain time in the future for a certain price.

delivery price) It can be contrasted with a spot contract which is an agreement to buy or sell immediately It is traded in the OTC market Forward Price The forward price for a contract is the delivery price that would be applicable to the/rate of return on your investment, assuming the amount of investment is the initial margin required? Commodities Futures Trading CME group Monopoly of commodity trading http://www.cmegroup.com/ Homework On September 4, 2007, the crude oil futures traded at NYMEX was quoted/


®1999 South-Western College Publishing 1 Chapter 16 Interest Rates And Bond Valuation.

Rate –Yield to maturity of a zero Forward RateForward Rate –Yield to maturity of a zero Investor purchases at some future dateInvestor purchases at some future date Forward ContractForward Contract –Agreement between buyers and sellers Holding Period ReturnHolding Period Return –Rate/ changes in yield Sensitivity measured by durationSensitivity measured by duration ®1999 South-Western College Publishing 14 Corporate Bond Quotes Cur Net Cur Net Bonds Yld Vol Close Chg Bonds Yld Vol Close Chg ATT 8 1 / 8/


October 12, 2006 1 Mexico Risk Management Conference Chicago Board of Trade Interest Rate Futures Presented by: Ted Ehret Director of Business Development.

east and Midwest October 12, 2006 4 Futures Market Fundamentals The evolution of the futures markets A temporary solution: Forward contracts –A privately negotiated agreement in which the buyer and seller agree on price, quality, quantity and a future delivery date of the commodity,/a 30-day basis rounded up to the nearest cent). Price Quote 100 minus the average daily fed funds overnight rate for the delivery month (e.g. a 7.25 percent rate equals 92.75) Contract Months First 24 calendar months Last /


Interest Rate Swaps and Agreements Chapter 28. Swaps CBs and IBs are major participants  dealers  traders  users regulatory concerns regarding credit.

.98% and quarter has 90 days Swap Rate key principle in finding swap rate is no arbitrage opportunity – PV of payments received must equal PV of payments made rate used for discounting? forward discount factor is PV of $1 received at period t find forward discount factor for period using forward rates – but adjust rates for number of days in quarter Forward Discount Factors for period 1 for period/


Chapter 07 Foreign Currency Derivatives 1. Foreign currency futures quotation, valuation, and speculation Foreign currency futures and forward contracts.

to their broker to execute a round turn – Use of a clearing house as a counterparty – All contracts are agreements between the client and the exchange clearing house. Therefore, there is no counter-party risk 6 Using Foreign Currency /Speculation Speculating in the forward market – If Hans were to speculate in the forward market, his viewpoint would be that the future spot rate will differ from the forward rate – Today, Hans should purchase Sfr173,611.11 forward six months at the forward quote of $0.5760/


Futures.

Junior, Nifty Midcap 50, futures on 207 individual stocks Commodity futures Currency futures Interest rate futures NSE: Notional T – Bills, Notional 10 year bonds (coupon bearing and / in case of futures. Since forward contracts are agreements between the two parties, each part face the counterparty default risk. Forwards vs. Futures Most future positions /Short a futures contract Buy the asset Make delivery Pricing Futures Do the quoted prices reflect true value of the underlying index? Does there exist any/


Forward Looking Market Instruments Forward,Swap,Futures,Option s.

is selling at premium. In the event that spot and forward rates are equal the currency is said to be flat. Swaps Commercial Banks rarely use forward exchange contracts for interbank trading; instead swap agreements are arranged. Definitio: A foreign exchange swap is a /broker. Broker’s Market If a bank wants to buy a particular currency several other banks could be contacted for quotes. OR the bank representative could input an order with an electronic broker where many banks participate and the best price /


Derivatives Derivatives are usually broadly categorized by: The relationship between the underlying and the derivative (e.g. forward, option, swap) The.

rates, commodities, stocks or other assets. More complex derivatives can be created by combining the elements of these basic types. For example, the holder of a swaption has the right, but not the obligation, to enter into a swap on or before a specified future date. 2rameshwar patel A forward contract or simply a forward is an agreement/ the equivalent cash amount the terms by which the option is quoted in the market to convert the quoted price into the actual premium–the total amount paid by the holder/


FIN 413 – RISK MANAGEMENT Futures and Forward Markets.

commission. –Executes trades. –Provides advice and other services. –May provide online trading at reduced rates. Discount broker: –Charges a smaller commission. –Executes trades and provides fewer other services. Futures /S2S2 Spot price Loss on futures Effective price received by the farmer Newspaper quotes The National Post web site, May 25, 2007: www.canada.com//290 B1 S1 $295 B2 S2 $300 B3 S3 $298 B4 B3 Forward contract An agreement between two parties (a buyer and a seller) to exchange a specified /


SO WHAT’S THE BIG DEAL ABOUT MAINTENANCE? The Importance of Maintenance Agreements in a Successful Dealership.

Price your NON-Contract Rates so high, the maintenance agreement is a ‘No-Brainer’ Procedures If they decline, have them read and sign the Rate Sheet and leave a /Agreements Communication AccessLine SmartNumber (accessline.biz) Call Forwarding Service Administering Maintenance Agreements Communication AccessLine SmartNumber (accessline.biz) Call Forwarding Service Eliminate Expensive Live Answ. Svcs Administering Maintenance Agreements Communication AccessLine SmartNumber (accessline.biz) Call Forwarding/


The Foreign Exchange Market Exchange Rates 1/12/01 German Mark: DM2.0554 per US dollar Japanese Yen: ¥118.53 per US dollar British Pound: $1.4778 per.

market. 90% of trading take place with respect to the US dollars. The reasons for quoting most exchange rates against a common currency (a vehicle currency) Avoid informational complexity Avoid the possibility of triangular arbitrage Three types of transactions 1. Spot 2. Forward 3. Swap Spot transaction An agreement on price today, with settlement usually two business days later. Settlement = actual delivery of currency/


Chapter 7 Using Derivatives to Manage Interest Rate Risk

asset, instrument, or contract. Managing Interest Rate Risk Derivatives Used to Manage Interest Rate Risk Financial Futures Contracts Forward Rate Agreements Interest Rate Swaps Options on Interest Rates Interest Rate Caps Interest Rate Floors Characteristics of Financial Futures Financial Futures /Futures The underlying asset is a Eurodollar time deposit with a 3-month maturity. Eurodollar rates are quoted on an interest-bearing basis, assuming a 360-day year. Each Eurodollar futures contract represents/


1 International Fixed Income Topic 7A:SWAPS 2 Outline F Description of a Swap F Motivation for Swaps F Graphical Analysis F Valuation and Interest Rate.

rate »floating interest rate such as 6-month LIBOR (London Interbank Offer Rate), a Treasury bill rate, Prime rate, Fed Funds,... »semi-annual payments of fixed and floating. F The swap rate quoted is the fixed rate. 5 Swap Jargon F The fixed-rate/ rate will not equal the time-zero forward rates unless the term structure is flat. u Thus, each individual forward /agreements 42 Credit Enhancement (OTC Derivatives) F Netting Arrangements »bilateral close-out is now standard in the ISDA master swap agreement/


Advanced Financial Accounting: Chapter 7

/ X units of foreign currency 1/x : x/x Tan & Lee Chapter 7 © 2009 Spot Rate and Forward Rate Foreign Currency Market 外匯市場 Spot Rate Market: Rate are quoted for immediate delivery on a particular day Forward market: Contractual agreement between two parties where the rate is fixed today but the delivery is at a future time Forward rate> Spot rate = Premium Forward rate < Spot rate = Discount :加價, 溢價 :折扣; 打折扣 Tan & Lee Chapter 7 © 2009 Types of Foreign Exchange/


Chapter Outline Foreign Exchange Markets and Exchange Rates

forward contract) Forward rate – the exchange rate specified in the forward contract Forward Premium and Discount If the forward rate is higher than the spot rate, the foreign currency is selling at a premium (when quoted as $ equivalents i.e. U$/C$) If the forward rate is lower than the spot rate/ prices Managing risk Enter into a forward agreement to guarantee the exchange rate Use foreign currency options to lock in exchange rates if they move against you but benefit from rates if they move in your favour/


T21.1 Chapter Outline Chapter 21 International Corporate Finance Chapter Organization 21.1Terminology 21.2Foreign Exchange Markets and Exchange Rates 21.3Purchasing.

agreement to trade currencies based on the exchange rate today for settlement within two business days Spot exchange rate The exchange rate on a spot trade Forward trade An agreement to exchange currency at some time in the future Forward exchange rate The agreed-upon exchange rate to be used in a forward/Ltd Slide 23 T21.18 Chapter 21 Quick Quiz 1. What is a “cross-rate”? The implicit exchange rate between two currencies quoted in a third currency. 2. Name three types of participants in the foreign exchange/


Chapter 13 Exchange Rates and the Foreign Exchange Market: An Asset Approach.

the two markets are equal. –Especially true for exchange rates quoted in the major foreign exchange trading centers (London, /rates, e.g., related to sales or purchases in trade. $/£ spot and 3-month forward rates Spot rate 3-month forward 6-month forward Source: Datastream $/£ spot and 3 and 6-month forward rates ¥/$ spot and forward exchange rates Spot rate 3-month forward6-month forward/ Futures (clients: speculators)Forward (clients: hedgers) Traded in securitized form An agreement between two parties Can/


Foreign Exchange Quiz What is foreign exchange? (Trading nations’ moneys.) What is the exchange rate? (The price of one nation’s money in terms of another.

banks. Observing prices (exchange rates) being quoted. Observing prices (exchange rates) being quoted. Exchange Rate and Risk What is exchange rate risk exposure? What is exchange rate risk exposure? (Earning a /forward dollars. Foreign Exchange and Forward Contracts What is a forward foreign exchange contract? What is a forward foreign exchange contract? (An agreement to exchange one currency for another on some date in the future at a price set now [the forward exchange rate]). Foreign Exchange and Forward/


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