Forward foreign exchange rate formula (ID: 137) [Edit]
Description of the Forward foreign exchange rate formula
Formula for the calculation of a forward foreign exchange (FX) rate of a currency pair.
Formula
\[ C_{f} = C_{s} \cdot \frac{\left ( 1 + i_{p} \cdot \frac{n}{N_{p}} \right )}{\left ( 1 + i_{b} \cdot \frac{n}{N_{b}} \right )} \ \]
Symbols
\(C_{s}\ \)
Spot exchange rate
\(i_{b}\ \)
Interest rate for a deposit on n days in base currency
\(i_{p}\ \)
Interest rate for a deposit on n days in price currency
\(n\ \)
Number of days between spot date and delivery date of the forward
\(N_{b}\ \)
Number of days per year for the deposit in base currency (360, 365 or 366 depending on day-count convention)
\(N_{c}\ \)
Number of days per year for the deposit in price currency (360, 365 or 366 depending on day-count convention)