Sorry if this has already been addressed. In the guideline answers it shows the credit risk of a long EUR contract holder to be calculated as: Spot Price/(1+foreign rate) - Forward Price/(1+domestic rate) This is backwards from everything in my notes where I have inflows being calculated at the forward rate and outflows at the spot. So it seems to me it should be: Forward Price/(1+domestic rate) - Spot Price/(1+foreign rate) What am I missing?
MT, not sure if you are reading it right… the company is canadian, and in the answer they have the euro rate under spot… you see it?
Ahhh currency questions confuse the heck out of me. So if it was a EUR/CAD forward it would be as I stated?
Rereading your answer Bankin, I’m still not sure I get it. I got the right interest rates in the right place. I guess I am confused as to whether the value to the long is spot - forward or forward - spot. I was under the impression it was forward - spot
They are the same thing, it just depends on whether you learned it in Schweser or CFA. Schweser does Forward-Spot, so that a negative value is intuitive.