Forward points: Difference between revisions
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imported>Doug Williamson (Expand calculation, for clarity.) |
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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. | ||
Revision as of 15:56, 16 March 2015
Forward points (for example one month forward points of 5-8) are a conventional short-form method of quoting multiple forward foreign exchange 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
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.
