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I noticed that Bloomberg and SuperDerivatives both use "Deposit Rates" for the calculation of forward points for currencies.

I couldn't find anything online that describes precisely where these rates come from. Are they just the LIBOR rates in the respective currencies? Since the deposit rates are quoted out past 1 year terms, this can't be entirely correct.

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  • $\begingroup$ What tickers you using? $\endgroup$ – imanuelcostigan Feb 13 '15 at 3:53
  • $\begingroup$ See response to Phil H's answer below. $\endgroup$ – Sargera Mar 17 '15 at 20:55
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Unless there is something specific happening in those systems, Depo rates should be exactly that. So if you can deposit cash for some rate b or borrow for some rate a, then those rates can be used to calculate the implied forward foreign exchange.

The details of when that is appropriate and at what terms is particular to the currencies involved, so until we know that it is hard to be specific.

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  • $\begingroup$ So for example if you go to the terminal and look up USD/RUB Curncy OVDV and go to the tab Dep/Fwd Rates. What is this "deposit rate?" Similar for other currency options/forward contracts in Bloomberg. SuperDerivatives has the same language. $\endgroup$ – Sargera Mar 17 '15 at 20:55
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Deposits are tradable instruments and the deposit rates on broker screens etc. represent indicative market quotes for these instruments. They can be traded for any maturity in theory but most deposits would be less than a year in maturity.

LIBOR rates, on the other hand are benchmark interest rates for selected maturities, published each working day by a central calculating agent based on the submissions of participating banks' opinions on hypothetical borrowing rates.

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Boththe base and term depos cannot be equal to libor rates. This is because the forward points and spot are known , so, whatever rate you choose for 1 of the interest rates, the other will be implied from the arbitrage equation fwd=spot x (1 +rT)/(1+qT)

Practice in recent years has been to have the usd int rate come from the 3m libor curve.

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