Questions tagged [forward]

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

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Short term implied fx rate

For context, I'm working towards constructing a FX implied rate curve based on the fwd points market. As you know, most of the spot rates usually settle in t+2. We can group fwd points in two types, ...
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Reasons for negative autocorrelation of forward prices

I am working on each trade day's forward prices of gasoline. I noticed that the autocorrelation at lag 6 is significantly negative. I know how to interpret negative autocorrelation in a statistical ...
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Understanding FX forward points and market usage [closed]

I've been trying to make sense of how the FX forward market works. Let's say today is June 13, 2022. And we have the next market info as seen in Bloomberg for the FX cross between USDMXN, assuming mid ...
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Trying to check this 1Y1Y forward treasuries calculation

here is a screenshot of the FWCM screen on Bloomberg: https://imgur.com/a/cO5kIOz I'm trying to check that I understand this by calculating the 1Y1Y which according to this matrix is 3.6877%. So the ...
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Is a swap fixed rate always a par yield?

I am learning about using the OIS fixed rate to value a plain vanilla LIBOR swap. I'm using Bond Math by Smith, and the accompanying online addendum. To bootstrap the discount factors, the author ...
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Jarrow and Turnbull (1997) Discrete time forward rate confusion

I'm reading Jarrow and Turnbull (1997). They defined $p(t,T)$ as the time $t$ price of a default free zero coupon bond paying a sure dollar at time $T$ where $0\le t \le T$ (in year). They also ...
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Why is the formula for the 5y5y inflation swap forward on bloomberg 2*USSWIT10 Curncy-USSWIT5 Curncy

If USSWIT10 Curncy is the expected average inflation for ten years and the USSWIT5 Curncy is the expected average inflation for five years, I don't know why that formula would tell me what the ...
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Implied forward rate with forward points

I've been studying the application and derivation of a domestic implicit rate in a FX contract when your input are the forward points and the foreing rate. Let's establish some with some ideas first. ...
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How to calculate the tom next / TN points for EURTRY, knowing that the spot dates differ, T+1 and T+2?

My input is the swap points curves for say EURUSD (spot T+2) and USDTRY (spot date T+1) as well as a spot rate reference. The general approach for crossing when spot dates are the same is to calculate ...
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How to compute portfolio weight of forward contract

how would one formally calculate the portfolio weight of a Forward position? Suppose I have 100 mio portfolio. I have 50mio in Tesla shares and I have 50mio in Microsoft shares, and I enter into a 1 ...
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Is there anyone trading Then-Current Treasury Forward?

The treasury forward traded for those on-the-run or off-the-run makes sense. You simply trying to hedge the treasury bond already issued by calculating the forward price of the bond. I was wondering ...
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Black option price formula and forward price (discrete dividends)

the price of a call option is $$C(0)=P(0,T)[FN(d_1) - KN(d_2)]$$ Now I want to calculate greeks of option price but with respect to spot price $S$ instead of forward price $F$. Can I assume any form ...
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How is VaR calculated for forward contracts accounting for European put options?

My initial idea is to create profit and loss using an equation like this: \begin{align} P\&L = & \text{European Put P&L} + \text{Forward P&L}\\ P\&L = & [(K-S_T)^+...
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Is Clark's Futures calculation incorrect?

I was working through Clark's Commodity option pricing: A practitioner's guide published 2014, and when I get to the Futures case study section 2.3.3, the answers I get differs from his (I tried to ...
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Forward volatility vs current volatility

I am working on a Quiz that asks why the 6 month forward volatiliy could be greater than the 6 month current volatility. I would first like to clarify if I understand the Question correctly. When we ...
73 views

Forward Price from Spot Price QuantLib

Is there a way to compute the forward price of a bond from its spot price in QuantLib? Based on the documentation and on examples online, it seems that it is only meant to be used with a yield term ...
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Why is the forward price of an ETF that holds futures equal to the current price of the ETF?

I've seen some ETFs that only hold futures (and some cash) whose options are being priced with a forward price equal to the current ETF price, even for 1 year out options (at least according to ...
1 vote
391 views

How to derive forward price on stock with continuous dividend

Let $F_{t,T}$ be the forward price of a stock $S$ at time $T$ and $t$ be the current time. The stock pays a proportional continuous dividend at a rate of $q$ and the risk-free rate is $r$. How can I ...
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Why would one need forward prices to perform derivatives pricing?

I am trying to understand the purpose of inputs the software of my company is using. Amongst others it needs calibration instruments, a model type, initial values of the respective underylings and a ...
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Does change of futures price influence spot price to change as well?

There is no problem in understanding how the changes in spot price can cause the future price to change. For example, if we have a big changes in supply and demand (e.g. war breakout, unexpected heavy ...
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What is the convenience yield of Bitcoin?

Question What is the convenience yield of the cryptocurrency? Back-up Explanations According to the 4-page long research paper, Crypto carry, the widely varying funding rates of perpetual futures (...
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Simple hedging technique comparison question: forward market vs money market

I am trying to do some self studying and came across this question. I am not sure how I would analyze these hedging strategies to figure out which is better. Could you give me any help on how I could ...
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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 ...
231 views

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, ...
185 views

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 ...
1 vote
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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 ...
1 vote
181 views

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 ...
1 vote
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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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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-...
1k views

what is the difference between an NDF and a FX Forward contract

Reference of NDF definition： https://www.investopedia.com/terms/n/ndf.asp For example, an NDF contract on Chinese Yuan and US Dollar is pretty much a CNH/USD fx forward contract, isn`t it ? In terms ...