Forward Rates

Simply put, an FX forward is the exchange rate at which a counterparty agrees to exchange one currency for another at a future date (not spot). This panel can be added to a workspace by clicking on More in the main toolbar and then selecting Forward Rates in the Calcs section.

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cmtyView offers two approaches to this calculation: 1) The Forward Rates ‘default’ is to calculate the forward spot rate using only the prevailing interest appropriate for a specific time period and 2) The Inflation Adjusted using the ‘risk free rate’ which requires an additional step to take into account inflation to obtain the prevailing interest appropriate for a specific time period.

Explanation of the variables:

-Currency Pair (exampled would be ^USDBRL)

-Spot Price of Currency Pair

-Base Interest Rate (font leg currency, USD for this example)

-Quote Interest Rate (back leg currency, BRL for this example)

-Spot Date (date of initial transaction)

-Forward Date (date of delivery)

-Time in Days (duration quoted in days)

-Basis (duration quoted in years)

-Forward Rate (final calc derived using the above values)

Enter in the spot price manually or select a FX pair using the Select Currency Pair dropdown to pull in the current last traded price.

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When selecting an FX par that has either the base or quote as USD, you can quickly pull in the USD interest rate by clicking on the down arrow button selecting the prevailing rate.

Once all variables have been entered, click ‘Calculate Forward Rate’ and the value is automatically computed.

To adjust the calculation for inflation, click on the dropdown menu in the upper right corner and select the Inflation Adjusted option.

Note the two new variables for base and quote inflation.