approach the bank and request for rolling over the contract for another 122 days at the same forward rate
of USD 1 = INR 45.3763.
Although a rollover is usually allowed because of a change in exposure, some traders use the rollover
procedure to avoid making losses. In the above example, assume that the merchant in the USA agrees
to pay on June 30, but the exchange rate has changed in the market and is at USD 1 = INR 44.3756 on
June 26. It is also believed that the Indian rupee is likely to appreciate further during the next few days. In
that case, the forward contract will result in a loss of (45.3763 – ...
Become an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month, and much more.