Hi, just a question on FX swaps…how can you roll the forward contract by engaging in an FX Swap? There’s actually an example on page 508 of Book 2 that I don’t quite get regarding the rolling of the forward contract…I’d appreciate any form of assistance. Thanks.
Can you post the example?
By settling the existing contract, and entering a new one. If you were long a currency forward (ie. accepting delivery), you would use the inflow on the settlement date to long a new contract. If you were short (ie. expected to deliver) you would buy currency at spot (to satisfy delivery on settlement date), and sell a new forward contract. You’re essentially marking to market at the end of the contract. What specifically don’t you understand about the given example? Can you post exact details?
im not understanding why i just finished econ and currency rates in schweser and havent seen anything to do with this…is it in a further section in schweser or did schweser leave it out? i get the official books end of august so i cant see what section it is but it has me worried…
It probably isn’t directly related to any econ LOS in particular. Chances are you’ll revisit it in Derivatives, and if you don’t, it likely won’t even be tested.
i started thinking that right after i posted…i think forwards and swaps are derivitaves…thanx
It’s clearer now…Thank you.