Questions tagged [forward]
A contract between two parties to make a transaction at a specified future time.
314 questions
0 votes
2 answers
92 views
Why does the forward-price formula compound discrete dividends using cost-of-carry-rate 𝑐 rather than interest rate 𝑟?
In Wikipedia, the formula for the forward price of a tradable underlying that pays discrete dividends is given as: My confusion is this: once a dividend $D_i$is paid at time $t_i$, it becomes cash ...
- 41
0 votes
0 answers
58 views
How to manually compute FX year-end turn (broken date forward points) from standard forward curve?
I’m trying to understand how to manually calculate the FX year-end turn for g10 and EM currencies, how would i go about doing this. I have standard market data for fwds, but i am stuck what to do next?...
3 votes
1 answer
393 views
Cross-currency Basis Adjustment for Multi-curve Models
I am studying Pricing and Trading Interest Rate Derivatives - A Practical Guide to Swaps, and I have troubles to really understand the use of cross-ccy swaps (XCS) and why the cross-ccy basis enter ...
- 53
0 votes
0 answers
79 views
confusion about the covered interest rate parity formula
Example 5.6 Suppose that the 2-year interest rates in Australia and the United States are 3% and 1%, respectively, and the spot exchange rate is 0.7500 USD per AUD. From equation (5.9), the 2-year ...
- 73
0 votes
0 answers
59 views
Calibrating a surface contago/backwardation futures
If the option's underlying are a futures $F_t$ contract where the cost of carry is $\\\$0$, and there is contago/backwardation occurring that is larger than the interest rate of T-bonds: $$\frac{F_t}{...
1 vote
0 answers
82 views
Should ES and SPX options have the same ATM skew
According to my understanding, ES options are based on futures, whereas SPX options are based on the underlying S&P 500 directly. However, how does this impact their ATM skew. These should still ...
- 183
0 votes
0 answers
90 views
Calculate return on a FX forward
If i want to do a carry trade with a forward and calculate the potential return, is it more correct to look at which one ? S = spot = 7.0 F = 1yr forward = 8.0 i_US = USD 1yr rate = 5% (F/S - 1)*100 ...
3 votes
0 answers
146 views
Approx. for futures / forward convexity adjustment in ATS models
I'm not an IRD expert, so bear with me. I'd like to have a quick and dirty approximation for the (SOFR) futures/forward convexity adjustment under affine term structure models in continuous time. ...
- 3,813
1 vote
0 answers
117 views
Modeling commodity forward curve on illiquid market
I am trying to model forward curve for palladium in isolated market environment (entering contracts in other markets is close to impossible / costs too much), where no derrivatives on palladium are ...
2 votes
0 answers
100 views
How does one prove that a quanto forward needs an adjustment?
How does one prove that without a quanto adjustment there would be an arbitrage between the domestic forward and the quanto forward?
- 922
1 vote
1 answer
404 views
Bloomberg ICVS92 Cross Currency Basis
Can someone help me understand how Bloomberg computes the Cross currency basis, for maturity < 1 year? On the ICVS 92 (EUR vs. USD basis) page, we can see the CC basis mid (I don't have access to ...
- 11
3 votes
0 answers
237 views
Bond Forward price calculation - TRS vs Bond Forwards
I am trying to value a Bond Total Return Swap (TRS) asset leg (receive bond return) and understand how it differs from a Bond Forward. I understand that the most vital difference would be due to the ...
- 39
3 votes
1 answer
245 views
Marking an FX Forward Position
I understand that one simple way to calculate the present value of an fx forward position is to assume an offsetting transaction at the current market price and discount the (future) 'net' cash flow ...
- 43
0 votes
0 answers
108 views
Question on yield curves and credit spreads
Can someone help solve this question please? I couldn't find my way around it. I've been at it for quite some time now. I would appreciate any help. Thank you so much. Consider the following term ...
- 1
1 vote
1 answer
1k views
How to explain the repo rate in equity forward price formula?
The equity forward price formula is: $F(T) = S_{t}\cdot e^{(r_{f} - r_{repo}-div)\cdot (T-t)}$ where $S_{t}$ is the spot price, $r_{f}$ is the risk-free rate and $r_{repo}$ is the repo rate and $T$ is ...
- 13