You hold a set of forward contracts on eur, against usd (=hc). Below I show you the
Question:
You hold a set of forward contracts on eur, against usd (=hc). Below I show you the forward prices in the contract; the current forward prices (if available) or at least the current spot rate and interest rates (if no forward is available for this time to maturity). Compute the fair value of the contracts.
(a) Purchased: eur 1m 60 days (remaining). Historic rate: 1.350; current rate for same date: 1.500; risk-free rates (simple per annum): 3% in usd, 4% in eur.
(b) Purchased: eur 2.5m 75 days (remaining). Historic rate: 1.300; current spot rate: 1.5025; risk-free rates (simple per annum): 3% in usd, 4% in eur.
(c) Sold: eur 0.75m 180 days (remaining). Historic rate: 1.400; current rate for same date: 1.495; risk-free rates (simple per annum): 3% in usd, 4% in eur.
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International Finance Putting Theory Into Practice
ISBN: 978-0691136677
1st edition
Authors: Piet Sercu