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Calculation for expected spot rate?
The expected spot rate can be estimated by observing the relevant forward rate. E.g. expected spot rate in 90-days can be estimated by observing the 90-day forward rate.
What is the difference between the forward rate and the future rate in financial markets?
The forward rate is the agreed-upon rate for a future transaction that is set today, while the future rate is the expected rate for a future transaction that is not yet agreed upon.
What is forward rate in foreign exchange market?
Transaction in future date by forward contract(future delivery) to purchase/sell foreign exchange at prevailing rate.
Currencies of countries with high inflation rates tend to have forward discounts.why?
This question is based on the concept of interest rate parity between two countries. A country with a high inflation rate will have high interest rates as compared to other countries. this will make it's currency to depreciate against its trading partners hence the forward discount.
What is forward premium How does the forward market help in reducing currency risk in international business?
The forward premium arises due to interest differentials between two currencies. In order that the two currencies have the same intrinsic values as they have today and avoid interest arbitrage, the premium/discount comes into effect.The forward rate includes the forwrd premium/discount and so the risk of spot market moving in the wrong way is minimised by entering into a forward contract.
How a forward premium or discount is computed?
forward exchange rate can be computed from spot exchange by adding or subtracting premium ir discount. also forward rate can be at forward premiun of discount when comapred to spot exchange rate.
Does currency appreciate or depreciate if the forward rate increases?
If the forward rate increases, it indicates that the currency will depreciate in the future. This is because a higher forward rate implies that the currency will be worth less in the future compared to the present.
What Dynamic balance rate of forward process equals the rate?
The 'Dynamic balance rate' of forward process equals the rate of the backward (reversed) reactionA + B --> P + Q Let the forward rate be RfwandP + Q --> A + B the backward rate let it be RbwthenRfw = Rbw at Dynamic (balanced, thermodynamical) Equilibrium
Calculation for expected spot rate?
The expected spot rate can be estimated by observing the relevant forward rate. E.g. expected spot rate in 90-days can be estimated by observing the 90-day forward rate.
What is the difference between the forward rate and the future rate in financial markets?
The forward rate is the agreed-upon rate for a future transaction that is set today, while the future rate is the expected rate for a future transaction that is not yet agreed upon.
What happens after equilibrium?
Rate of forward reaction=rate of backward reaction
What is forward rate in foreign exchange market?
Transaction in future date by forward contract(future delivery) to purchase/sell foreign exchange at prevailing rate.
When does space reach equilibrium?
When the rate of the forward reaction is the same rate of the reverse reaction.
What is the difference between spot and forward exchange rate?
In forward exchange rate, the rate is booked in advance for a fixed amount and period,which will remain unchanged in case of any market fluctuation or deceleration.In fact forward exchange rate booking is done to protect or guard against volatile market condition. In spot exchange rate, the exchange rate prevalent on a particular date is booked for immediate effect.
IF Covered Interest rate Parity says that interest rate differential equal?
forward/discount rate premium
Are fx forward rate quoted in basis points?
FX forward rate is absolutely quoted in basis point. For example, the spot rate for MYR/USD 3.1010 - 3.1234. The 3 months forward rate is quote by ABC bank as 3.1210 - 3.2000. Thus, the basis point is 200 bps and 766 bps. From here, we can understand that basis point is use to describe or to determine the changes of forward rate in short by using basis point.
What is a property of a reaction that has reached equilibrium?
the rate of the forward reaction is greater than the rate of the reverse reaction.
