Forward points: Difference between revisions
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Forward points (for example one month forward points of 5-8) are a conventional short-form method of quoting | Forward points (for example one month forward points of 5-8) are a conventional short-form method of quoting forward foreign exchange (FX) rates, by reference to the related foreign exchange spot quote. | ||
The spot foreign exchange quote is adjusted by applying, for example, the one-month forward points to it, to calculate the full one month forward foreign exchange quote. | The spot foreign exchange quote is adjusted by applying, for example, the one-month forward points to it, to calculate the full one month forward foreign exchange quote. | ||
'''Example''' | <span style="color:#4B0082">'''Example: Full forward quote calculation'''</span> | ||
If the spot foreign exchange quote is: | If the spot foreign exchange quote is: | ||
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And if one-month forward points are 5-8 (rising) | And if one-month forward points are 5-8 (rising): | ||
Then the one-month forward exchange quote is: | Then the one-month forward exchange quote is calculated by adding the forward points as follows: | ||
1.6000 + 0.0005 | |||
= 1.6005 USD | |||
1.6010 + 0.0008 | |||
= 1.6018 USD | |||
The full forward quote (bid-offer) is: | |||
GBP 1 = 1.6005 - 1.6018 USD. | GBP 1 = 1.6005 - 1.6018 USD. | ||
''It is also often possible for a customer to construct a forward FX contract, by dealing separately in the spot FX contract and the swap points.'' | |||
== See also == | == See also == | ||
* [[Forward contract]] | |||
* [[Foreign exchange]] | * [[Foreign exchange]] | ||
* [[Forward foreign exchange rate]] | * [[Forward foreign exchange rate]] | ||
Latest revision as of 16:52, 30 May 2016
Forward points (for example one month forward points of 5-8) are a conventional short-form method of quoting forward foreign exchange (FX) rates, by reference to the related foreign exchange spot quote.
The spot foreign exchange quote is adjusted by applying, for example, the one-month forward points to it, to calculate the full one month forward foreign exchange quote.
Example: Full forward quote calculation
If the spot foreign exchange quote is:
GBP 1 = 1.6000 - 1.6010 USD
And if one-month forward points are 5-8 (rising):
Then the one-month forward exchange quote is calculated by adding the forward points as follows:
1.6000 + 0.0005
= 1.6005 USD
1.6010 + 0.0008
= 1.6018 USD
The full forward quote (bid-offer) is:
GBP 1 = 1.6005 - 1.6018 USD.
It is also often possible for a customer to construct a forward FX contract, by dealing separately in the spot FX contract and the swap points.
