this question in the book specifically is EXPIRING on that day.
“The first position is a long forward currency contract to buy pounds at ˆ1.4500. The current exchange rate is ˆ1.4000 per pound.”
So St = 1.40 and F = 1.45
and St - F will be what the long’s value will be and because it is negative - Short owes Long, so Long bears the credit risk.
Is the Schweser question you are talking about this one?
Cramer includes the following:
A forward contract sold has 6 months to delivery, contract price = 50. Underlying has no cash flows or storage costs and is currently priced at 50. No funds exchanged up front.
a. contract has current credit risk.
b. contract has potential credit risk
c. contract has neither potential nor current credit risk
it does not have any current credit risk.
but it has potential credit risk - since St - F/(1+r)^t will be either positive or negative.
If negative - firm has to pay - so counterparty bears credit risk. If positive - firm will receive and so firm bears credit risk.