What is the market convention for discounting the future cash flows of FX forwards? In particular, I would be interested to know what discounting curves are used for both collateralised and not collateralised FX forwards.


2 Answers 2


See 'Collateral Posting and Choice of Collateral Currency' (Theorem 1, in particular) and 'A Note on Construction of Multiple Swap Curves with and without collateral' by Fujii et. al., and also 'Cooking with Collateral' by Piterbarg (the basics of unsecured and collateralized cases for forward contracts in general are covered in Piterbarg's paper 'Funding beyond discounting: collateral agreements and derivative pricing').


I would suggest picking up the book "Options, Futures, and Other Derivatives" by Hull. Lots of good knowledge on cash flows pertaining to FX, etc. A bit more quantitative but the discounting aspect is emphasized and I think it will make better sense. If you can't find a download link, lmk :)

  • 4
    $\begingroup$ Why not look up the specific question in the book and tell us the answer... referencing Chapter and page number. $\endgroup$
    – nbbo2
    Mar 10, 2021 at 21:41

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