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Have you seen formulae for stocks where a dividend yield $q$ pops up? The same idea applies here and is more general a part of the notion of cost of carry. In general, $$F_t=S_te^{b(T-t)},$$ where $b$ is the cost of carry, i.e. $$b=\text{Cost from holding the asset} - \text{benefits from holding the asset}.$$ For a stock, you gain the dividend yield $q$ but ...


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Basically trading a forward contract is like trading the underlying currencies, you just have to factor in the foreign and domestic interest rates. For example, say you are trading a EURUSD forward. You just add the cost of carry (CoC) for that maturity to the current spot rate and you have the forward rate (you can find the cost of carry formula in like 2 ...


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Interest rate parity is not sufficient now There is a cross currency basis between the IRP result and observed market prices, because essentially Libor does not represent the cost of funding; in particular the implied USD funding rate deviates significantly from the USD Libor. Cross currency basis (as a swap) is a traded quantity which covers that ...


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It would be in the form of an FX swap, with the first leg on the last day day of the month/quarter , and the second leg on the first day of the next month. In swap you exchange the notionals on the first leg date, and then reverse exchange the notionals with swap points adjustments on the second date. The swap points reflect the interest rate plus the impact ...


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