Skip to main content

Questions tagged [forward]

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

Filter by
Sorted by
Tagged with
0 votes
1 answer
59 views

variation margin affecting futures price

A quote from Natenberg's Option Pricing and Volatility, on stock index futures and how variation margin can change their price. Ignoring dividends, the fair value of a stock index forward contract is ...
APerson's user avatar
  • 11
0 votes
0 answers
38 views

Computing the price of a zero-coupon bond [closed]

I'm given the following exercise: Question 1: Suppose that CHF-USD spot and forward exchange rate are as follows: Spot: 1.00 90-day forward: 1.06 a) Supposing that the forward contract is correctly ...
letmethinkaboutit's user avatar
-4 votes
2 answers
151 views

Forward price confusion [closed]

What exactly is the "forward price"? I have read that it is the price the long position in the forward contract will pay the short position for delivery at maturity (this is agreed upon at ...
herbhofsterd's user avatar
-1 votes
0 answers
53 views

Price of a forward contract with continuous dividend yield

(Edited version: Please read the bottom first.) The price at time $t$ of a forward contract with delivery price $K$ and maturity $T$ is $$ F(T) = S(t) - K e^{-r(T-t)}.$$ If the underlying asset pays ...
herbhofsterd's user avatar
0 votes
1 answer
75 views

Minimum variance hedge ratio for currency hedging

The textbook formula for minimum variance hedge ratio (MVHR) is correl (Y,X) * (STDEV Y / STDEV X) However, I would like to reconcile the textbook formula with the ...
sjedi's user avatar
  • 23
0 votes
0 answers
13 views

Constant maturity bond fund returns in downward sloping curve

Assume the following: we are running a constant maturity bond fund (10yrs) all zero coupon bonds to maintain the maturity, we buy bonds of 10y and sell the 9y bonds 1y later price of 10y bond is 100, ...
2len's user avatar
  • 1
0 votes
0 answers
105 views

How do I calculate the implied dividend yield and/or the forward rate for an equity ETF?

I am interested in building an implied volatility surface for a given ETF given a set of option prices for several combinations of (call/put,strike,expiry). I am interested in different ways to arrive ...
quantypythonshow's user avatar
0 votes
0 answers
54 views

Basis for Forwards

Does the concept of a "Basis" for a forward based product make sense, or is it only ever explicitly for Futures? I understand the concept could mean the Forward Spot - Spot, but am not aware ...
ESN's user avatar
  • 1
0 votes
0 answers
44 views

DV01 for Bond Forwards

Does anyone know how to get the DV01 of bond forwards from Bloomberg? I used FPA to get the forward price but can't figure out how to get the DV01. Thanks!
Stephanie's user avatar
0 votes
1 answer
181 views

Forward Rate Volatility Calculation - Caps

I am trying to calculate the forward rate volatilities from cap volatilities using Rebonato`s volatility model. Unfortunately, my approach always results in unrealistic forward rate vols. Furthermore, ...
Marc157's user avatar
  • 55
0 votes
0 answers
137 views

help calculating Pnl for fx forwards

Below there is a trader’s portfolio. What is PnL explain for eod 04-July-2022? If you think that some information is missed feel free to add any data you need for calculations. ...
Jim's user avatar
  • 1
1 vote
1 answer
113 views

Implied Distributions from forward prices

I understand that the common way to arrive at an implied distribution for an underlying is through the price of its call options as per the Breeden-Litzenberger formula. I am wondering if its possible ...
nzc's user avatar
  • 11
0 votes
1 answer
64 views

Convenience yield intuition on consumption assets?

Something I'm having difficulty wrapping my head around is the argument that commodity futures can be in backwardation due to a large convenience yield, for example "to keep a production process ...
rb612's user avatar
  • 197
1 vote
0 answers
33 views

forward price and forward rate of a corporate bond

For risk free zero coupon bonds we can derive forward rates from observed the prices of zero coupon bonds. For example if the 1y zero rate is 1% and the 2y zero rate is 2% we can derive that the 1yr ...
mbison's user avatar
  • 1,578
0 votes
1 answer
160 views

Is the Forward Price of a bond subject to the Pull to Par?

From my understanding: FwdPx= SpotPx - Accruals + Financing Assume that the yield curve is flat/or that the bond yield stays the same the next day, i.e. that the market is unchanged and that the only ...
Giuseppe's user avatar
5 votes
1 answer
805 views

How does a stock becoming hard to borrow affect puts and calls?

Here is my understanding from what I’ve gathered, but I want to confirm if this is correct (and/or if there’s something I’m missing). If a stock becomes hard to borrow, one can create a synthetic ...
rb612's user avatar
  • 197
1 vote
1 answer
151 views

Connection between the $\sigma$ parameters of the spot price and the forward price

It is well known, that under the Black-Scholes framework: $$F\left(t,T\right)=\exp\left(r\left(T-t\right)\right)S\left(t\right),$$ where $S\left(t\right)$ is the spot price of an asset at time $t$, $F\...
Kapes Mate's user avatar
0 votes
1 answer
186 views

Present value of an FX Forward contract at each simulation and time point node of a Monte Carlo simulation

Recently I started dealing with the xVA and the associated EPE and ENE concepts. In a numerical example of an FX Forward, after simulating the underlying FX spot $S_t$ (units of domestic per unit of ...
Whitebeard13's user avatar
1 vote
2 answers
174 views

How do we price a Non-USD currency FX Forward pair by using cross-currency basis for each currency?

For e.g., when pricing a GBPUSD FX-Forward we build the USD SOFR curve through which we get USD risk-free rate. For the GBP risk-free rate, we use the sum of GBPUSD Basis and SONIA. However, if we ...
humanoid's user avatar
1 vote
2 answers
319 views

Why does cost of borrow have anything to do with the equity forward price?

By non-arbitrage, you buy the stock and hold it to the delivery date of the forward, only cost of funding (of cash) and equity dividend would be involved in the equity forward calculation. Where does ...
Peaceful's user avatar
  • 734
0 votes
0 answers
102 views

When Forward is a martingale under risk-neutral measure?

Why is such a proof for futures not suitable for a forward? For futures we have: $V_{t}$ is self-financing portfolio: $V_t = \frac{V_t}{B_t}B_t$, where $B_t$ is a riskless asset Suppose $H_t$ - number ...
Strike's user avatar
  • 13
0 votes
1 answer
165 views

Deriving central bank hikes/cuts from a swap curve

Can you please explain the following? Please assume I am 5 years old. how do you derive the cuts/hikes of the policy rate priced in a swap curve? why you can derive the cuts/hikes only from a swap ...
Finance_student's user avatar
1 vote
1 answer
382 views

swap carry/rolldown mid-period

Pretty much all discussions and examples I have seen discussing carry and roll down for fix-flt interest rate swaps are ones where the forward date coincides with the coupon dates on both legs. It ...
Magnyz's user avatar
  • 91
0 votes
0 answers
82 views

Forecasting forward curve using Gaussian Process Regression

I have daily closing prices of crude oil monthly contracts up to 36 months. Some contracts are not very liquid so there are missing prices at random. I stitched together contracts to make them rolling ...
MilTom's user avatar
  • 165
1 vote
1 answer
117 views

Value of a forward contract proof

I am reading the book - "Mathematics for Finance: An Introduction to Financial Engineering" by Marek Capinski and Tomasz Zastawniak. I am going through the proof of Theorem 6.4 - For any $t$ ...
anthony's user avatar
  • 11
0 votes
1 answer
57 views

Hedge up-knock-in forward option

I wolud like to know if there is an analytic formula to to valuate a up-knock-in forward, it means \begin{equation*} (S_{H_B}-S_T)1_{[H_B\leq T]} \end{equation*} where $H_B=\inf[t\geq0 | S_t=B]...
Don P.'s user avatar
  • 103
0 votes
1 answer
229 views

Why must the forward price be equal to the expected value for an underlying security [closed]

In page 59 of his book Option Volatility and Pricing, Natenberg argues that the forward price of an underlying security is essentially the market's consensus expected value for that security, ...
Matthew Kaplan's user avatar
0 votes
1 answer
383 views

Substituting the basis swap for the FX forward

I have come across a response to the question titled "Cross currency swap a combination of 2 Interest rate swap" on this site. There, it is stated the following: Long story short: As @...
Bogaso's user avatar
  • 836
0 votes
0 answers
148 views

Futures and Forward prices under the Heston model and their spread

This might seem like a very trivial question but I am really not so sure about it so I thought I post it here. Assuming a Heston model of the form \begin{eqnarray} dS &=& (r-q)Sdt + \sqrt{v}...
not_sure95's user avatar
1 vote
0 answers
137 views

Why does forward price equal spot price at delivery? [closed]

Disclaimer: I understand this is a basic question that gets addressed in most 101 textbooks. Yet I have reviewed many of them not finding a satisfactory answer. Please bear with my ignorance. Suppose ...
Student's user avatar
  • 111
0 votes
0 answers
105 views

Cost of carry proof

I'm currently review Arbitrage Pricing in Continuous time by Bjork and am stuck on this concept: Honestly I'm not too sure where to start as this chapter makes no mention of the Cost of Carry formula ...
Sushiix's user avatar
  • 17
3 votes
0 answers
96 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 ...
Nick A.'s user avatar
  • 131
0 votes
0 answers
38 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 ...
TylerD's user avatar
  • 101
3 votes
0 answers
197 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}\...
Kapes Mate's user avatar
-1 votes
1 answer
298 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_{...
Kapes Mate's user avatar
1 vote
0 answers
241 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\...
Eduardo Contreras's user avatar
2 votes
1 answer
480 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 $t_0$...
Conductor's user avatar
0 votes
1 answer
143 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 -...
anthony's user avatar
  • 11
1 vote
2 answers
142 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}...
Xman's user avatar
  • 267
0 votes
2 answers
469 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). ...
Wassim's user avatar
  • 1
1 vote
0 answers
149 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 ...
quantotonto's user avatar
1 vote
0 answers
71 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} = (...
Aldo Shumway's user avatar
0 votes
0 answers
66 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 ...
wowmyguy's user avatar
0 votes
1 answer
948 views

Trying to check this 1Y1Y forward treasuries calculation

here is a screenshot of the FWCM screen on Bloomberg: https://i.sstatic.net/2BT3y.jpg I'm trying to check that I understand this by calculating the 1Y1Y which according to this matrix is 3.6877%. So ...
filifunk's user avatar
  • 119
0 votes
0 answers
211 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 ...
K.K.'s user avatar
  • 103
1 vote
1 answer
750 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 ...
filifunk's user avatar
  • 119
0 votes
0 answers
361 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. ...
Aldo Shumway's user avatar
0 votes
0 answers
38 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 ...
mbison's user avatar
  • 1,578
0 votes
1 answer
92 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 ...
HoldBreath's user avatar
0 votes
0 answers
55 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)^+...
Kyle's user avatar
  • 11

1
2 3 4 5 6