Currency Forward question

CFA Level II
#1

Just want to check my understanding: For a currency forward, if E(S) > FP, then the forward market for domestic currency is in contangio, right? Assume E(S) and FP denominated in DC/FC. Thanks…

#2

Contango and backwardation is more commonly used, as far as I know with Commodity Futures. I have not seen it mentioned with regards to Currency futures. They are also Futures terminology, not Forwards. But, what do I know!

#3

Thanks. You are right about the futures vs forward reference. However, I have seen a reference to contango and backwardation with respect to currency futures e.g. CFAI EOC question 14 Reading 59. My original question should read: Just want to check my understanding: For a currency future, if E(S) > FP, then the futre market for domestic currency is in contango, right? Assume E(S) and FP denominated in DC/FC. Thanks…

#4

contango and backwardation are futures concept

#5

S > FP -> Backwardation S < FP -> Contango E(S) > FP -> Normal Backwardation E(S) < FP -> Normal Contango

#6

thanks. this makes.

#7

thanks. this makes sense.