In Hull's book, he says that: "An example of a derivative that can be handled by the linear model is a forward contract to buy a foreign currency." Then he continues with, "For the purposes of calculating VaR, the forward contract is therefore treated as a long position in the foreign bond combined with a short position in the domestic bond." I know what a linear model, forward contract, bonds, long/short position, and VaR mean by studying Hull's book. But I still cannot understand his reasoning. My intuition says that a forward contract can be handled by a linear model because a change in the price of the underlying asset translates linearly to the value of the contract at maturity.