Foreign Exchange Forward Market Solution Market Taker Calculation
- Slides: 10
Foreign Exchange Forward Market Solution : Market Taker - Calculation Transactions Money Market 3 months EUR Bid/Ask : 3. 35% / 3. 38% Money Market Basis on 92 days 1/ You would like to Borrow 1, 000 EUR for 3 months time (92 days). - Which interest rate do you use to deal? Ask : 3. 38% - What will be the Future Value? 1, 000 * (1+(0. 0338 * 92 / 360)) = 1, 000 * 1. 00863778 = - 1, 008, 637. 78 EUR 2/ You would like to Lend 1, 000 EUR for 3 months time (92 days). - Which interest rate do you use to deal? Bid : 3. 35% - What will be the Future Value? 1, 000 * (1+(0. 0335 * 92 / 360)) = 1, 000 * 1. 00856111 = + 1, 008, 561. 11 EUR IMAFA - FX FORWARD EXERCISE CORRECTION 1
Foreign Exchange Forward Market Solution : Market Taker – Calculation Transactions Money Market 3 months EUR Bid/Ask : 3. 35% / 3. 38% Money Market Basis on 92 days 3/ You would like to Borrow X EUR for 3 months time (92 days)? Future Value 1, 000 EUR. - Which interest rate do you use to deal ? Ask : 3. 38% - What will be the Present Value? 1, 000 / (1+(0. 0338 * 92 / 360)) = 1, 000 / 1. 00863778 = + 991, 436. 19 EUR 4/ You would like to Lend X EUR for 3 months time (92 days)? Future Value 1, 000 EUR. - Which interest rate do you use to deal? Bid : 3. 35% - What will be the Present Value? 1, 000 / (1+(0. 0335 * 92 /360 )) = 1, 000 / 1. 00856111 = - 991, 511. 56 EUR BBA EDHEC International Treasury Management 2
Foreign Exchange Forward Market Solution : Market Taker - Flows Transactions Money Market 3 months Bid/Ask : EUR - 3. 35% / 3. 38% Money Market Basis on 92 days 1/ You would like to Borrow 1, 000 EUR for 3 months time (92 days)? + 1, 000 EUR (Present Value) - 1, 008, 637. 78 EUR (Future Value) 2/ You would like to Lend 1, 000 EUR for 3 months time (92 days)? - 1, 000 EUR (Present Value) + 1, 008, 561. 11 EUR (Future Value) 3/ You would like to Borrow X EUR for 3 months time (92 days)? Future Value 1, 000. 00 EUR + 991, 436. 19 EUR (Present Value) - 1, 000 EUR (Future Value) 4/ You would like to Lend X EUR for 3 months time (92 days)? Future Value 1, 000. 00 EUR - 991, 511. 56 EUR (Present Value) + 1, 000 EUR (Future Value) BBA EDHEC International Treasury Management 3
Foreign Exchange Forward Market Solution : Market Taker - Calculation Transactions Money Market 3 months Bid/Ask USD – 5. 32% / 5. 35% Money Market Basis on 92 days 1/ You would like to Borrow 1, 000 USD for 3 months time (92 days). - Which interest rate do yo usue to deal? Ask : 5. 35% - What will be the Future Value? 1, 000 * (1+(0. 0535 * 92 / 360)) = 1, 000 * 1. 01367222 = 1, 013, 672. 22 USD 2/ You would like to Lend 1, 000 USD for 3 months time (92 days). - Which interest rate do you use to deal? Bid : 5. 32% - What will be the Future Value? 1, 000 * (1+(0. 0532* 92 / 360)) = 1, 000 * 1. 01359556= 1, 013, 595. 56 USD BBA EDHEC International Treasury Management 4
Foreign Exchange Forward Market Solution : Market Taker - Calculation Transactions Money Market 3 months Bid/Ask USD – 5. 32% / 5. 35% Money Market Basis on 92 days 3/ You would like to Borrow X USD for 3 months time (92 days). Future Value 1, 000 USD. - Which interest rate do you use to deal? Ask : 5. 35% - What will be the Present Value? 1, 000 / (1+(0. 0535 * 92 / 360)) = 1, 000 / 1. 01367222 = 986, 512. 19 USD 4/ You would like to Lend X USD for 3 months time (92 days). Future Value 1, 000 USD. - Which interest rate do you use to deal? Bid : 5. 32% - What will be the Present Value? 1, 000 / (1+(0. 0532 * 92 /360 )) = 1, 000 / 1. 01359556 = 986, 586. 80 USD BBA EDHEC International Treasury Management 5
Foreign Exchange Forward Market Solution : Market Taker - Flows Transactions Money Market 3 months Bid/Ask USD – 5. 32% / 5. 35% Money Market Basis on 92 days 1/ You would like to Borrow 1, 000 USD for 3 months time (92 days). + 1, 000 USD (Present Value) - 1, 013, 672. 22 USD (Future Value) 2/ You would like to lend 1, 000 USD for 3 months time (92 days). - 1, 000 USD (Present Value) + 1, 013, 595. 56 USD (Future Value) 3/ You would like to borrow X USD for 3 months time (92 days). Future Value 1, 000. 00 USD. + 986, 512. 19 USD (Present Value) - 1, 000 USD (Future Value) 4/ You would like to lend X USD for 3 months time (92 days). Future Value 1, 000. 00 USD. - 986, 586. 80 USD (Present Value) + 1, 000 USD (Future Value) BBA EDHEC International Treasury Management 6
Foreign Exchange Forward Market Exercise : Market Taker - Indirect quotation Forward EUR/USD 3 months on 92 days Spot EUR/USD Bid/Ask : 1. 2805/1. 2810 EUR 3 months Bid/Ask : 3. 35%/3. 38% - USD 3 months Bid/Ask : 5. 32%/5. 35% 1/ You would like to Sell 1, 000 USD Forward in 3 months time. a) Foreign Exchange Spot Rate used? Ask : 1. 2810 b) Interest rate in USD and EUR used? USD Ask : 5. 35% - EUR Bid : 3. 35% c) What will be the Foreign Exchange Forward Rate? 1. 2810 * ((1+(0. 0535*92/360)/(1+(0. 0335*92/360)) = 1. 2810 * 1. 0050677 = 1. 2875 BBA EDHEC International Treasury Management 7
Foreign Exchange Forward Market Exercise : Market Taker - Indirect quotation Forward EUR/USD 3 months on 92 days Spot EUR/USD Bid/Ask : 1. 2805/1. 2810 EUR 3 months Bid/Ask : 3. 35%/3. 38% - USD 3 months Bid/Ask : 5. 32%/5. 35% 2/ You would like to Buy 1, 000 USD Forward in 3 months time. a) Foreign Exchange Spot Rate used? Bid : 1. 2805 b) Interest rate in USD and EUR used? USD Bid : 5. 32% - EUR Ask : 3. 38% c) What will be the Foreign Exchange Forward Rate? 1. 2805 * ((1+(0. 0532*92/360)/(1+(0. 0338*92/360)) = 1. 2805 * 1. 004915 = 1. 2868 BBA EDHEC International Treasury Management 8
Foreign Exchange Forward Market Exercise : Market Taker - Indirect quotation Forward EUR/USD 3 months on 92 days Spot EUR/USD Bid/Ask : 1. 2805/1. 2810 EUR 3 months Bid/Ask : 3. 35%/3. 38% - USD 3 months Bid/Ask : 5. 32%/5. 35% 1/ You would like to Sell 1, 000 USD Forward in 3 months time. d) What will be the Forward points? Forward Rate – Spot Rate = 1. 2875 – 1. 2810 = + 0. 0065 Forward Rate > Spot Rate « + » => premium 2/ You would like to Buy 1, 000 USD Forward in 3 months time. d) What will be the Forward points? Forward Rate – Spot Rate = 1. 2868 – 1. 2805 = + 0. 0063 Forward Rate > Spot Rate « + » => premium BBA EDHEC International Treasury Management 9
Foreign Exchange Forward Market Exercise : Market Taker - Indirect quotation Forward EUR/USD 3 months on 92 days Spot EUR/USD Bid/ask : 1. 2805/1. 2810 EUR 3 months Bid/ask : 3. 35%/3. 38% - USD 3 months Bid/Ask : 5. 32%/5. 35% 1/ You would like to Sell 1, 000 USD Forward in 3 months time. e) What will be the countervalue in EUR? - 1, 000 USD / 1. 2875 = + 776, 699. 03 EUR 2/ You would like to Buy 1, 000 USD Forward in 3 months time. e) What will be the countervalue in EUR? + 1, 000 USD / 1. 2868 = - 777, 423. 62 EUR BBA EDHEC International Treasury Management 10
- Spot market in foreign exchange market
- Foreign exchange forward contract
- Forward market
- Forward rate dan forward market
- Functions of foreign exchange market
- Objectives of foreign exchange
- Structure of the forex market
- Structure of foreign exchange market
- Foreign exchange market features
- Stability of foreign exchange market
- Foreign exchange market example