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A typical FX forward trade would settle the foreign currency 2 days after the fixing of the FX rate. The forward leg of this trade would be priced by discounting in the domestic currency the value of the FX forward rate obtained through non-arbitrage.

In case the payment delay is much greater than 2 days, we may expect a convexity adjustment in the pricing formula. I struggle to find in the literature a formula for this convexity adjustment. I'd appreciate your input into this, for instance with a toy model or approximated formula.

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    $\begingroup$ You mean a non-delivery forward, rather than physical delivery? Can you please clarify why you see a need for the convexity adjustment? $\endgroup$
    – Dimitri Vulis
    Commented Aug 17 at 2:27
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    $\begingroup$ This question is similar to: convexity adjustment for pricing mark to market (mtm) cross currency swap. If you believe it’s different, please edit the question, make it clear how it’s different and/or how the answers on that question are not helpful for your problem. $\endgroup$
    – Dimitri Vulis
    Commented Aug 19 at 10:33

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