9

Foreign Exchange

“A forward foreign exchange swap is a temporary purchase or sale of one currency against another. An equivalent effect could be achieved by borrowing one currency, while lending the other.”

Introduction

Spot exchange rates

Forward exchange rates

Cross-rate forwards

Short dates

Calculation summary

Value dates

Forward-forwards

Non-deliverable forwards (NDFs)

Time options

Long-dated forwards

Arbitraging and creating FRAs

Discounting future foreign exchange risk

Exercises

Where you see the WWW icon in the following, this calculation is available already programmed in Microsoft® Excel to be used online or downloaded (or copied and pasted) for your own use. Go to www.markets-international.com and click ‘Calculations’.

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