Dear,
On Chapter. 14 of the Scheweser 2014, I was confused with Bid-Ask rates.
Q. 1>
Entered into 90 day forward contract buy CAD 1mil. with AUD.
Spot rate: 1.0511/1.0519
90 day: +15.6/+16.8
At maturity of the contract, the spot rate is 1.0612/1/0614.
When we calculate the profit/loss in AUD for forward contract, we should use 90-day ask rate : 1.0519+16.8/10,000=1.05358. Right?
BUT,
Q.2>
Entered into 90 day forward contract long CAD 1mil against AUD at a forward rate of 1.05358 AUD/CAD.
30 day after initiation,
Spot rate: 1.0612/1.0614
60 day: +8.6/+9.0
When we compare the forward rate with forward rate(t=30), the book said that we need to use 60 day BId rate:1.0612+8.6/10,000=1.6206
How come we need to use the ask rate in Q.1 and use the bid rate in Q.2 differently?
Please leave your advices for me.
Thank you!!!