Why are we taking the 2 year fixed rate of 1.12% instead of calculating the rate using the discount factors esp as the bank is the receive floating party?
Also, when we say shorting a currency forward contract, shouldn’t we be using the current spot exchange rate to calculate the value instead of the forward rate at initiation. Why do we use 112.1 instead of 112? Referring to Q4 in Derivatives Pricing and Valuation.