Questions tagged [forward]

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

Filter by
Sorted by
Tagged with
3 votes
0 answers
72 views

Replication Proofs and No-Arbitrage Proofs

I've just started studying quantitative finance and have had questions closed on this forum for being too basic; if that's the case for this one please let me know a more suitable place to ask. Assume ...
  • 131
0 votes
0 answers
31 views

"Forward" attribute for an option

I am downloading implied volatilities for some options. I noticed, however, that I am also able to choose "Forward" as an attribute for the option. What is this? Is it an option written on a ...
  • 101
3 votes
0 answers
93 views

What is the dynamic of the forward price process under $\mathbf{Q}$?

Let me define the Spot price process of an underlying as follows: $$dS_{t}=\mu_{S}S_{t}dt+\sigma_{S}S_{t}dW_{t},$$ where $\left(W_{t}\right)_{t\geq0}$ is an appropriate Wiener-process, so $\left(S_{t}\...
-1 votes
1 answer
127 views

Call option on forward [closed]

What is the trade description behind a call option on a forward? How can it be described with words and not with mathematical formulas? So what is the intuition behind the following payoff: $$Payoff_{...
0 votes
0 answers
48 views

Calculate Carry from Z-spread to Forward Spot Curve

I am considering a 5-year bond. I can buy this 5-year bond today, or I can buy it 3 months from now. My question pertains to carry on the forward position. If I buy the bond forward and use the ...
  • 35
1 vote
0 answers
87 views

Black and Scholes PDE in terms of Future Price [closed]

I was trying to understand why the Black and Scholes PDE for the value of an option, $V (F , t)$, with the forward price, $F$, as underlying is $$\frac{\partial V}{\partial t} + \frac{1}{2}\sigma^2F^2\...
1 vote
1 answer
149 views

Forward on a stock with Dividends

I have seen the question here and have gone through the answer, but I still don't fully understand why the approach below, based on no-arbitrage, yields a different answer. To summarize: At time $t_0$...
0 votes
0 answers
83 views

Accrued Interest and Forward Pricing of Bond with Quantlib

I'm working on a forward bond pricing engine so i can either calulate the repo rate, or the forward price of the operation. I'm using bloomberg as a reference to see if my values are right. First ...
0 votes
1 answer
58 views

If the interest rate is constant, then the forward price and the futures price are equal? [closed]

I was going through the proof about the equality of forward and futures price (assuming constant interest rate) in a book. Somewhere, the authors used the fact that suppose we start with two capitals -...
0 votes
0 answers
109 views

FX Average Rate Forward pricing in OVML

The help document says that "When settled in the foreign currency, the payoff is set by the difference between the inverse of the average rate of the spot and the inverse strike. The payoff is no ...
  • 1
1 vote
2 answers
111 views

Bond forward arbitrage relationships

I am trying to see if the following statement is true or not and I would really appreciate your help. The statement is as follows: $\forall $ Tradable Asset $V(t)$, $$ E[\frac{P(t,T_{i})P(T_{i},T_{i+1}...
  • 237
0 votes
1 answer
148 views

VaR on forward contracts

I am trying to calculate a historical VaR, let's say on a forward contract of Gas that has a delivery in December 2022 ( begin delivery = 1st December 2022 and end delivery = 31st December 2022). ...
  • 1
0 votes
0 answers
43 views

Asymmetry in cash and carry arbitrage with carry costs?

I'm a bit confused on the effect of carry in the cash-and-carry arbitrage scenario. Assume we have a commodity $C$. The spot price is \$100. Assume a 2% risk-free rate. Assume a 1% carry cost, no ...
  • 113
0 votes
0 answers
75 views

Crypto perpetual futures (swaps) pricing away from instantaneous moment of funding

Most perpetual futures offered by crypto exchanges employ a funding payment mechanism, that acts to periodically return the price of the perpetual to the underlying index price. The mechanism is ...
0 votes
0 answers
49 views

Forward Equity Curve Computation

I have been thinking about how forward equity prices are usually computed. For the purpose of simplicity, let us take a share paying deterministic discrete dividends $(D_i)$ at times $(T_i)$ with a ...
1 vote
0 answers
48 views

Forward returns measurment?

Is there a common approach to measure how a forward contract is performing? Here's what I'm thinking, each day you would price your forward with the next formula. $$ F_t = S_0 e^{-r_f T}-Ke^{-r T} = (...
0 votes
0 answers
79 views

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, ...
0 votes
0 answers
59 views

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 ...
2 votes
1 answer
317 views

Understanding FX forward points and market usage

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 ...
0 votes
1 answer
343 views

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 ...
  • 119
0 votes
0 answers
120 views

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 ...
  • 103
0 votes
0 answers
41 views

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 ...
  • 103
1 vote
1 answer
319 views

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 ...
  • 119
0 votes
0 answers
153 views

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. ...
0 votes
0 answers
24 views

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 ...
  • 1,476
0 votes
1 answer
61 views

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 ...
0 votes
0 answers
48 views

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)^+...
  • 11
0 votes
0 answers
53 views

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 ...
0 votes
0 answers
90 views

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 ...
0 votes
3 answers
164 views

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 ...
3 votes
2 answers
812 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 ...
0 votes
0 answers
90 views

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 ...
  • 151
1 vote
0 answers
68 views

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 ...
2 votes
0 answers
54 views

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 ...
3 votes
0 answers
188 views

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 ...
  • 1,367
1 vote
0 answers
67 views

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 ...
  • 522
3 votes
2 answers
344 views

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 ...
  • 279
1 vote
0 answers
55 views

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/ ...
  • 522
1 vote
0 answers
50 views

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 ...
1 vote
0 answers
67 views

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) \...
  • 436
4 votes
3 answers
441 views

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 ...
2 votes
3 answers
396 views

Curve Trades - Forward Swap vs Swap(Payer and Receiver)

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 ...
2 votes
1 answer
274 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 ...
0 votes
1 answer
307 views

About American Forward Pricing

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, ...
  • 3
0 votes
2 answers
386 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 ...
  • 3
1 vote
1 answer
131 views

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 ...
  • 316
0 votes
0 answers
51 views

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 ...
  • 101
0 votes
2 answers
164 views

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
2 answers
229 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
1 answer
360 views

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. ...
user avatar

1
2 3 4 5 6