Question

Forward quotes:

a) What is a 90 days forward quote if direct euro for pound spot rate is 1.5432 and euro trades at 2.46% forward discount?

b) What is a 30 days forward quote if the indirect dollar for Swiss franc quote is 0.9753 and Swiss franc trades at 1.35% forward premium?

c) What is a 60 day forward quote if the price of a US dollar in Geneva is 1.0204-1030 and 60 day points are 35-43?

d) What is a 30 day forward quote if the indirect Swiss franc for yen quote is 100.2468-3579 and 30 day points are 35-23?

Answer 1

A)Direct=Euro/Pound

Forward Discount given for counter currency,i.e Euro

Hence Formula for Forward premium or discount=((Spot price-Forward)/Forward price)*100

Here Spot=1.5432 & Discout=2.46%

2.46=(1.5432-F/F)*365/90*100

((2.46/100)*90/365)*F=1.5432-F

0.00606F+F=1.5432

1.00606F=1.5432

F=1.5432/1.00606

F=1.5339

B) Direct quote=Swiss franc/Dollar=1/0.9753

1.0253 S fr/$

Forward premium is given in counter currency

Hence Formula for Forward premium or discount=((Spot price-Forward)/Forward price)*100

1.35=((1.0253-F)/F)*100*365/30

(1.35/100)*(30/365)*F=1.0253-F

0.001109F=1.0253-F

1.001109F=1.0253

F=1.02416 S fr/$

Or in indirect quote it is =1/1.02416=0.9764$/Sw fr

C)SPOT =1.0204-1030

60 days forward points=35-43

60 days forward rate=

BID=1.0204+0.0035=1.0239

ASK=1.1030+0.0043=1.1073

60 day forward rate=1.0239-1073

D)I assume that the forward points are given for indirect quote and the question need to convert it into direct quote.

Spot=100.2468-100.3579

Forward points=35-23(Reducing)

Forward rate=

Bid=100.2468-0.0035

Ask=100.3579-0.0023

Bid=100.2433

Ask=100.3556

Forward Rate=100.2433-100.3556

In direct quote Bid=1/ASK rate=1/100.3556=0.009964

Ask=1/Bid rate=1/100.2433=0.009975

Direct forward quote=0.009964-0.009975