Could someone give me the formula to value currency forwards?
St/(1+rf)^(T-t) - F/(1+rd)^(T-t)
St and F are specified as DC/FC
T=Original term of contract (6 months forward)
t = now (say 2 months later)
SFFD
qualitiativley the price of a forward is set at the price which allows the currency with the higher interst rate to depreciate by the difference in the 2 interest rates.