Questions tagged [forward]

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8
votes
0answers
667 views

compute time from FX forward, how use DEPO rates?

assume I have following delta-term vol data from broker: ...
5
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0answers
318 views

EUR/PLN and EUR/USD delta-term-vol surface quoting convension

does anyone know for sure what is the FX market convension to quote delta-term pairs for EUR/PLN, for EUR/USD. I know that for EUR/PLN it should be delta p.a forward, for EUR/USD it should be delta ...
4
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0answers
94 views

Replication of a dividend swap

I wanted to know how banks replicate dividend swap, my best guess is to take the spread between a Total Return Swap and a Forward.
4
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0answers
168 views

VAR FPCA analysis paper replication

I've been trying to replicate the following publication: CONSISTENT FUNCTIONAL PCA FOR FINANCIAL TIME-SERIES, Sebastian Jaimungal, Eddie K. H. Ng, 2007 but I havent been able to get the same results ...
4
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0answers
2k views

Carry Trade vs synthetic Carry Trade using forward contracts

When it comes to foreign exchange carry trade strategy, the definition is straightforward: an investor borrows 1 US-\$ in the US (low interest country) and invests that \$1 to AU (high interest ...
3
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0answers
116 views

Financing of an equity forward

How reasonable it is to assume that the forwards (implied through call-put parity from European options) on easy-to-borrow European stocks will "grow" at Euribor/Eonia rate? In other words, is it ...
3
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0answers
651 views

The effects of “cost of carry” and “convenience yield” in pricing futures and forwards

I understand that time-varying interest rates, “cost of carry” and “convenience yield” will have an effect on forward and futures prices but why would it affect the prices of forwards relative to ...
2
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0answers
70 views

Futures vs Forward pricing with different interest rates using binomial model

I'm given the aforementioned parameters for a two-step binomial model where the underlying pays no dividend, $S_0=50$ and $T=2$. With this information I was able to calculate the risk-neutral ...
2
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0answers
124 views

what numeraire is used to price an FX forward contract

By non-arbitrage, it is easy to show the relationship between fx forward and fx spot via the domestic and foreign currency interest rates. I am wondering how we can express this in terms of the ...
2
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0answers
43 views

Retrieve zero coupon curve from forwards

Let's suppose I am given a forward swap curve of a certain maturity (10Y). The curve is not very smooth and is decreasing but whatever. I have the curve : $S(0,t,t+T) = \frac{P(0,t) - P(0,t+T)}{\sum_{...
2
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0answers
46 views

Dimension reduction for worst of basket on $min(S_1, S_2)$

Suppose we want to price an exotic equity which is a function of $min(S_1, S_2)$. To do this, I'm trying to compute an implied volatility surface for $min(S_1, S_2)$ and then price the option using ...
2
votes
1answer
79 views

Units of measurement for Minimum Variance Hedge Ratio

The minimum variance hedge ratio is given by $h=p*\frac{\sigma_S}{\sigma_F}$. I was wondering if you wanted to calculate the S.D yourself and the spot prices were in Dollars per barrel while futures ...
2
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0answers
235 views

Extrapolating implied dividend yield

I have liquid option quotes for 1, 2, 3 and 4y expiries. I was able to imply the continuous dividend yield for all of those. How would you extrapolate such implied yield to 5 and 6y expiries?
2
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0answers
147 views

Forward spot calculation for a dividend paying no-short sell ETF

I am trying to fit an implied volatility curve for options on the SSE 50 etf that has no borrow (no short selling allowed) and pays a single annual dividend. I originally thought I could use the ...
2
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0answers
254 views

Reason for choosing the T-forward measure to calculate expected value of forward curves

Setup I read that when simulating forward curves $(r_t(s_i))_i$ at some future time $t>0$, one is supposed to center them not around $F(0;t,t+s_i)$, but around $$\mathbb E^{\mathbb Q_{t}}[r_t(s_i)]...
2
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0answers
146 views

why do forward contracts have varying sensitivity to yield, but futures contracts do not?

I just watched https://institute.cmegroup.com/courses/introduction-to-eurodollars/modules/understanding-convexity-bias as I understand it, if the yield rate of a futures contract increases, the price ...
2
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0answers
318 views

Long term equity repo

Let's assume I have various European stocks and would like to somehow estimate their long-term (5y+) forward prices. As for repo rate for each individual stock, is it reasonable to assume that its ...
2
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0answers
124 views

Are futures/forward contracts tradable in the middle of its life? If yes, how?

I think I'm having some trouble understanding what trading futures/forward contracts means. Assuming a market over the period $[0,T]$, for a European contingent claim $X_T$, my naive understanding is ...
2
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0answers
86 views

FRA-Strategy: Make 3-month and 1-year Excess returns comparable

I am trying to analyze an investment strategy that tries to exploit the empirical difference between forward interest rates and realized spot rates. I am using FRAs to capture the difference. I am ...
1
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0answers
52 views

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: ...
1
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0answers
57 views

What is an industry standard to value FX Forwards with margining?

I could not find any reference on market standard approaches to value FX Forward with margining options. Is computing the present value of FX Forward with spot, swap margin is so trivial? My ...
1
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0answers
49 views

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 $T$ $P_r(t,T)$ : ...
1
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0answers
54 views

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 ...
1
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0answers
80 views

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, ...
1
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0answers
111 views

Which is the “correct” 5Y5Y Inflation Expectation on Bloomberg, and what are the differences?

When the market talks about 5Y5Y expectation, is it referring to FWISUS55 Index, or G0169 5Y5Y BLC2 Curncy on Bloomberg? I ...
1
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0answers
15 views

Balance sheet items which might show exposure to hedging or the prevalence of forward contracts

I do have a panel data set on North American companies from Compustat covering balance sheet and income information. I am wondering if there is a possibility to use a balance sheet variable as an ...
1
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0answers
65 views

Application Itô's Lemma: Forward to Spot process

I am working on the following equation (I want to apply Ito's lemma on it): and I know that: and also and My problem is that I want the dynamic of F(S,T) without S because I need first to ...
1
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0answers
39 views

Hedged portfolio dynamics under T-forward measure

I'm looking to find the hedging PDE for a multi-currency derivative $u(F_d, F_f, X,t, T)$ under the T-forward measure, using the delta-hedging argument (F - forward rate, X - forward FX rate). ...
1
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0answers
317 views

Constructing USD 1M Libor Forward Curve

Hope you are doing fine. I am pricing a 1month IRS. For that purpose in order tu build the forward curve i have to use the following. Since USD 1m instruments do not exist, one has to use basis ...
1
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0answers
232 views

How can we value NPV for a standard FX Swap?

hope you are all well! Was just wondering how we can value the NPV on the value date for a FX swap - i'm sure it's by evaluating the interest rate payable/receivable from the trade date until the ...
1
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0answers
109 views

FX Average Forward Pricing

Lookin for documentation on how to price FX Arithmetic Average Rate Forwards. Couldn't find any info on textbooks. Any help is very appreciated.
1
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1answer
2k views

Pricing Uneven FX Swaps

I'm trying to figure out how to price uneven FX swaps. I just started on a FX trading desk and have been told that the all-in rate for a 2-legged FX swap is equal to: 1) Quote for market side of net ...
1
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0answers
298 views

Forward implied vol vs Instantaneous vol

In the Discrete Stochastic Implied Volatility Model which is from the standard Heston Model, the model shows the evolution of forward implied volatilities with time. I thought forward implied ...
1
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0answers
174 views

Modelling roll-over and roll yield in a forward strategy

This is a post which serves as a follow-up question to Nature of short VIX strategies. I am trying to understand where the change in value in a synthetic strategy constructed from futures comes from: ...
1
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0answers
714 views

Dividend yield for an index

Let's say we want to price an option and so need a dividend yield to plug into Black-Scholes. We can compute an implied dividend yield for a stock using: $$F=S_0 e^{(r-d)T}$$ and by isolating for $...
1
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0answers
300 views

Decreasing Forward FX rate curve

i've constructed a Forward FX curve using the formula: $F= Spot \frac{(1+I_b*n/N)}{(1+I_c*n/N)}$ when i get these Forward rates for 1 month, 3, 6 till 1 year i got a decreasing forward Fx Curve How ...
1
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0answers
99 views

Deriving Cox, Ingersoll and Ross expression for the relationship between forwards and futures, how do they conclude a specific step?

I'm trying to derive a specific relationship about the relationship between forwards and futures from "The relationship between forward and futures prices", written 1981 by Cox, Ingersoll and Ross (...
1
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0answers
993 views

Forward price - T-forward martingale

I have a problem figuring out some of the calculations in the book: Fixed Income modelling In the chapter on forwards the author makes an argument that the forward is a martingale under the T-forward ...
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0answers
52 views

References on Pricing commodity forwards

Any good reference on pricing simple forward contracts with source code? Thanks
1
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0answers
72 views

How should I use central banks rates in order to compute 2-day forward exchange rate on EURUSD

Good morning, I would like to compute a 2-day forward exchange rate on EURUSD. For that, I have historical data on EURUSD spot price, and I know that theoretically, when maturity is T we have : $F_0$...
1
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0answers
169 views

forward curve and cap/floors in nowadays environment

I'm currently trying to get the implied volatility of a vanilla Euro floor with maturity 1Y with data from bloom. I have the price ( which is not supposed to take into account the first floorlet ...
1
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0answers
71 views

What is the main point in the Forward contracts definition?

In Islamic Finance there is a contract called "Salaf" or "Salam" which is similar to Forwards except in time of payment which happens in the entering contract day (exactly unlike the Forwards). Some ...
1
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0answers
315 views

Bond pricing with HJM simulation

I'm using Glasserman 3.16 and 3.17 algorithm to price bonds. The algorithms evaluates the forward rates and the discount factor $B(0,t_j)$. My question is: How can I price bonds in a future time? I ...
0
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0answers
24 views

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 ...
0
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0answers
25 views

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): ...
0
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2answers
82 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 ...
0
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0answers
27 views

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 ...
0
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0answers
33 views

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 ...
0
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0answers
44 views

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 ...
0
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0answers
36 views

Return of a bond held to maturity and realised forward rates

Let's assume that forward rates are realised as part of a carry-roll-down scenario. The gross return of a bond under the realised forward assumption to maturity is: $\frac{c(1+f(2))(1+f(3))...(1+f(T))}...