Valuing Currency Forward

CFA Level II
#1

Hi All,

I am greatly confused with valuing Forward before its maturity. As per Schweser Books, it says we need to calculate difference between Spot Price and Future Priced, discounted at Foreign Country RF and Domestic Country RF, respectively. Now, while doing Mocks, I see that they have calculated Forward price applicable on that day. Now suppose, you were long Forward USD/GBP (i.e. you are long on GBP) at initiation. But now while valuing it, to offset position, you would consider being short (so you will use Bid rate for Forward USD/GBP). My question is why book is considering spot while Mock is considered Future price as on that day?

Please help! TIA

#2

Can anyone please respond?

#3

nobody knows about this? Can anyone of you clear my doubt?

#4

I wrote an article on this that may clear up your doubts: http://financialexamhelp123.com/valuing-currency-forwards/

#5

Which mock are you referring to (can you specify the question?) and the mock (KS, CFAI ??)

#6

To follow up with s2000, here’s another one : http://financialexamhelp123.com/mark-to-market-value-of-a-currency-forward-contract/

It shows both : The formula from econ et the formula from deriv.