# Questions tagged [forward]

A contract between two parties to make a transaction at a specified future time.

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### Should I train (and apply) a commodity forecasting model using nominal or real historical (futures) prices?

I am forecasting hourly power prices by applying Gradient Boosting to, among other variables, average monthly gas prices. The algorithm is currently trained on historical nominal monthly average gas ...
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### Forward/futures contracts that satisfy $F=S\exp(rT)$

I am interested in estimating riskless rates from forward/futures data. The standard forward pricing formula is given by $$F=S\exp(rT).$$ From this we can solve the interest rate used in pricing as a ...
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### How to calculate the theoretical price of a forward in CHF on a stock index future in EUR?

I am looking for a pricing model of the following contract, which is basically a forward contract, maturity in 3 month with some sort of strike on a (equally weighted basket of) stock index futures in ...
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### A question about exercise from "Paul Wilmott introduces Quantitative Finance"

I am new on this forum and i have just begun my adventure with finances, so please be patient. I was solving exercises from "Paul Wilmot introduces Quantitative Finance" and i came across ...
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### Pricing of a tracker certificate on basket of index futures

i'm new to Quant Stack Exchange but i already saw that the quality of the answers is outstanding, however, i have a question for which i haven't found an answer yet: I'm looking for a pricing model/ ...
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### Replicating call option in market which only trades stock and forward contracts

I am having a bit of trouble with a problem I've been given. Consider a market which only trades a stock and forward contracts. There's only time 0 and 1. Initial stock price S_0 is 10, the forward ...
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### Bergomi's model normalisation

On his book https://www.amazon.fr/dp/B019FNKQS8/ref=dp_kinw_strp_1 Bergomi derives a multifactor mean reversible volatility of the volatility such that : \begin{equation*} d \xi_{t}^{T}=\omega(\tau) \...
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### Is “at the money” referent to the spot or forward price?

This may be a trivial question, but one I wasn’t sure about. Imagine I want to buy a 1 year ATM straddle. Does “at the money” imply buying closest to the current spot price, or does it mean to buy at ...
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let's say I want to do a steepening trade. What would be the difference between entering a swap starting in 5 years and lasting for 5 years (5y5y) entering a payer swap with a tenor of 10 years and ...
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### Why has cross currency basis become higher since the 2008 crisis?

The impact of cross currency basis on FX forward pricing has become more noticeable since 2008, diverging significantly from the interest rate differential, what are the fundamentals behind this ...
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I just want to know if there is an analytical solution about FX American forward. I recently get a solution that computes price for each τ-maturity forward contract and then take a maximum price. So, ...
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### Compute forward swap rate from spot swap rate?

I am pretty new to interest rate swap and this question might sound silly. Why does 3y2y (3yr forward and 2yr tenor) swap rate roughly equal to (5*5y swap - 3*3y swap) / (5-3)? Any explanation would ...
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### Calculation of annual yield for NDFs

I was wondering if someone can help me understand how to interpret the "annual yield" that is getting calculated below for NDFs. This is the way it's currently done in the place I work, but ...
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### Is there a name for the common class of instrument which Spots and Forwards belong to?

I'm doing some database design where I'm modelling Forwards and Spots. They share the same schema, the only difference is that Spots have a settlement date of the time they were created at, while ...
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### Can you perform covered interest arbitrage when the forward rate is too low?

In covered interest arbitrage, if the forward rate is too high, you can (i) exchange domestic for foreign currency today (ii) invest at the foreign deposit rate (iii) exchange back to the domestic ...
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### Covariance matrix for risk factors of a FX Forward contract

Does it make sense to calculate log-returns of interest rates from a zero curve? Context: I'm trying to build a variance-covariance matrix for the risk factors of a USDBRL FX Forward maturing in 1 ...
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### Value american forward as american put and american call

Can I value an american forward with strike K and maturity T as the sum of a bought Call and sold Put, both american with same strike K and maturity T? If not, why?
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### Carry and expected return of a short bond basis position

If we assume net basis is 0, the bond trades above par, the bond’s yield > than the term repo rate, what is the expected pnl of being Short the ctd vs long futures? I would have thought the ...
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### QuantLib forward dates not matching

I am getting forward swap rates from spot rates of various different curves (3M USD Libor, 6M GBP Libor, 6M Euribor, Fed Funds, SONIA & EONIA): ...
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### Bid Price of a Forward?

Say I am a market maker. The ask (me selling it) formula is pretty common in textbooks etc by no arbitrage: $$F = S \cdot \text{exp}(r-d)$$ where $r$ is interest rate and $d$ -- dividend. Again, by no ...
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### Pricing of forwards contracts

Of the courses I am taking in college this semester, two are Financial Mathematics and Derivatives. In each course, we learn different formulas to calculate the forward price of a forward contract. ...
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### Brazil FX market "cupom cambial" [duplicate]

I am trying to understand the role of cupom cambial (onshore dollar rate) in relation to the BCB swaps which are domestic NDF settled in real. "The cupom cambial is priced in basis points as an ...
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### Future forward convexity adjustment as the expected profit from reinvesting margin payments?

Having looked at the formula for the convexity adjustment as a function of the covariance between rates accruing till maturity and asset price, I have an intuition that the difference between fair ...
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### Is there a forward contract the underlying of which is another forward contract?

Is there a forward contract on a forward contract? Let us take a simple example: Persons $A$ and $B$ agree that $A$ sells $B$ some asset tomorrow at the fixed price $K_1$. This is a normal forward ...
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### Odd Result from Computing Correlation Matrix from Kalman Filter Posteriori Covariance Estimate

I am using a Kalman Filter to estimate the return dynamics of a forwards curve on a particular commodity. My state space is the initial forwards values, and an initial guess of the drift functions for ...
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### Delta of a forwards contract

in university's lecture notes, from what I understand using the replication of portfolio principle to price derivates, the forward price of a contract K should be: $K = P_0(1+r)$ where $P_0$ is the ...
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### How does the term premium of the 10y20y Treasury forward rate relate to the 30y rate?

I'm reading recent research on Treasuries and to paraphrase, it says that long term 10y20y Treasury forward rates now have a positive term premium over the long run nominal funds rate (neutral rate). ...
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### Carry & Roll, roll down current curve valid assumption?

The assumption for calculating the roll of a fixed income instrument is that you roll down the current spot curve. So if 10y rate is 2% and 9.5y is 1.8% the carry for the coming 6 month horizon is ...
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### How to calculate the Net Present Value (Market-to-Market Value) of a plain vanilla FX forward?

I would like to understand the math/economics behind the calculation of plain vanilla FX forwards. Let's assume the following example: ...
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### How does one calculate carry-roll-down theoretically assuming expectations of short-term rates are realised

I am not asking for an explanation that is hugely quantitative, but rather one that is more intuitive. I am aware that there are different assumptions that one could take when it comes to carry-roll-...
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### Forward contract on a defaultable coupon bearing bond

Notations : $P(t,T)$ : the $t$-price of a coupon bearing bond paying coupons $C_i$ at $T_i$ maturing at $T$ $B(t,T)$ : the $t$-price of a non defaultable zero coupon bond paying 1 at $T$ $P_r(t,T)$ : ...
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### Forward contract on a given financial product $P$

I would like to know whether my reasoning is correct or not. Let $\pi_t$ be the price of a financial product $P$. The forward associated to a forward contract on $P$ that settles at time $T$ is given ...
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### Can arbitrage arguments be rearranged to avoid selling? (Hull, Chapter 5)

Suppose forward contracts are traded on a consumption asset, so there aren't necessarily people ready and willing to sell the asset to jump on an arbitrage opportunity. Suppose the asset has no yield, ...