Definition : In the two exchange foreign currency at the exchange rate which is agreed upon in advance and with the intent delivered in cash . Considered cash delivery within two working days , except for the Canadian dollar , which has a cash conduction time is one business day .
Example : Today is dated June 8, 2011 . Customer X buys EUR / USD 1,000,000 for the current price of 0.9950 delivery date of June 10, 2013 .
2 . Bid / Offer
Buy and sell has been given to each of the base currency . 1 unit of the base currency is how many units of other currencies .
Example : EUR / USD : 0.9950/54
Bid : 0.9950 is where the large trader / market maker membali base currency and the customer sells the currency .
Offer : 0.9954 is where the large trader / market maker sells the base currency and the customer buys the currency .
Example of a Spot Transaction .
Customer : I am a customer of X references , ask can you show me to the spot price for EUR / USD of 1,000,000 ?
Broker : 0.9950/54
Customer : At my purchase price of 0.9954 EUR 1 million .
Broker : Well at the price of 0.9954 you bought EUR to USD 1 million is due on the 10th of June .
3 . Forward Outright
A Forward Foreign Exchange market is an exchange of two currencies at a predetermined rate on a variety of date other than spot delivery .
A cash forward is a single exchange of two foreign currency at a predetermined rate for delivery next month ( Spot + Point Forward ) . The calculation of the exchange value of the Forward is based on the initial spot price and interest rate differentials:
Today: date ( June 8, 2013 ) Spot EUR / USD 0.9954 ( value date June 10 ) . Customer X buys EUR / USD 1,000,000 . Forward ( proposed ) , at the price of 0.9942 to 1 month . Foreign currency exchange rates on the date of July 10, 2013 .
An example of a forward cash price quotation:
SPOT EUR/USD
|
0.9950/54
|
1 Bulan
|
15 - 12 (Discount)
|
Kuotasi Forward Tunai
|
0.9935 - 0.9942
|
A Forward Outright Transaction :
Customer : I am a reference Customer X , ask can you show me the price Forward Outright EUR / USD of 1,000,000 to 1 month ?
Broker : Forward Cash EUR / USD for 1 month is 0.09935/42 .
Customer : Buy at 0.9942 price of € 1,000,000 .
Broker : Ok . at the price of 0.9942 you bought EUR to USD 1 million with a value date of July 10, 2013 .
4 . FX Swap
A Forward Foreign Exchange market is an exchange of two currencies at a predetermined rate on a variety of date other than spot delivery .
A Foreign Exchange Swap Market is an agreement to make an exchange value of foreign currencies at the current price with a reversal of the position of the two currencies on a specific date . In stark contrast of a Forward Outright is that there are treatments for the two delivery .
Can be compared with borrowing or lending .
Examples for FX Swap :
Customer : I am a reference Customer X , ask can you show me the price Swap USD / JPY for 3 months ?
Broker : Swap USD / JPY 3 months is -48/-44 .
Customer : Ok . Buy and Sell of 1,000,000 USD / JPY at the moment Swap -48 .
Broker : Ok . you have to buy 1 million USD / JPY at 122.75 value Spot July 10, 2013 and has sold 1 million USD / JPY at 122.27 with a value date of August 10, 2013 .
Description : There is no opening in the FX Swap Spot prices .
5. Premium / Discount
Premium / Discount is the difference in interest rates between the two sides of the foreign currency.
Premium: There is a premium when the value of Swap Positive (Forward rate exceeds a spot rate). It occurs when the interest rate of the base currency is lower than both the currency pair.
Examples for the USD / CAD Discount:
There is a Discount when Swap Negative values (Forward rate is lower than spot rate). It occurs when the interest rate of the base currency is higher than both currency pairs.
Example of EUR / USD:
6. Calculating Premium and Discount
Customers want to sell EUR 3,000,000 against the USD for the next 3 months.
Customer : I am a reference Customer X , ask can you show me the price Forward Outright EUR / USD of 1,000,000 to 1 month ?
Broker : Forward Cash EUR / USD for 1 month is 0.09935/42 .
Customer : Buy at 0.9942 price of € 1,000,000 .
Broker : Ok . at the price of 0.9942 you bought EUR to USD 1 million with a value date of July 10, 2013 .
4 . FX Swap
A Forward Foreign Exchange market is an exchange of two currencies at a predetermined rate on a variety of date other than spot delivery .
A Foreign Exchange Swap Market is an agreement to make an exchange value of foreign currencies at the current price with a reversal of the position of the two currencies on a specific date . In stark contrast of a Forward Outright is that there are treatments for the two delivery .
Can be compared with borrowing or lending .
Examples for FX Swap :
Harga Spot/USD
|
122.75/80
|
Forward Tunai
|
48/44 (Discount)
|
Customer : I am a reference Customer X , ask can you show me the price Swap USD / JPY for 3 months ?
Broker : Swap USD / JPY 3 months is -48/-44 .
Customer : Ok . Buy and Sell of 1,000,000 USD / JPY at the moment Swap -48 .
Broker : Ok . you have to buy 1 million USD / JPY at 122.75 value Spot July 10, 2013 and has sold 1 million USD / JPY at 122.27 with a value date of August 10, 2013 .
Description : There is no opening in the FX Swap Spot prices .
5. Premium / Discount
Premium / Discount is the difference in interest rates between the two sides of the foreign currency.
Premium: There is a premium when the value of Swap Positive (Forward rate exceeds a spot rate). It occurs when the interest rate of the base currency is lower than both the currency pair.
Examples for the USD / CAD Discount:
Tingkat Suku Bunga USD
untuk 3 bulan
|
1.25 pct
|
Tingkat suku bunga Dollar Canada untuk 3 bulan
|
2.75 pct
|
Nilai Swap USD/CAD
untuk 3 bulan adalah 54 / 58
|
There is a Discount when Swap Negative values (Forward rate is lower than spot rate). It occurs when the interest rate of the base currency is higher than both currency pairs.
Example of EUR / USD:
Tingkat Suku Bunga Euro
untuk 3 bulan
|
2.65 pct
|
Tingkat suku bunga USD untuk 3 bulan
|
1.30 pct
|
Nilai SWAP untuk
EUR/USD untuk 3 bulan adalah -38.5 / -33
|
6. Calculating Premium and Discount
Tanggal Transaksi
|
11 February
|
||||
EUR/USD
|
1.0710/14
|
||||
Nilai USD 3 bulan
|
1.25 / 1.35 %
|
Nilai EUR 3 Bulan
|
2.60 / 2.70 %
|
Maturity
|
90 Hari
|
Customers want to sell EUR 3,000,000 against the USD for the next 3 months.
How to calculate the selling price for the EUR / USD for 3 months:
Method 1: Forward Points = ((Spot x (1 + (OCR * n/360 value))) / (1 + (BCR value * n/360))) - Spot.
OCR = Other Currency Rate .
BCR = Base Currency Rate .
Forward Points = ( ( 1.0710 * ( 1 + ( 0.0125 * 90/360 ) ) ) / ( 1 + ( 0.027 rate * 90/360 ) ) ) - 1.0710 .
Swap = -0.00385
Forward rate = 1.0710 - 0.00385 = 1.06715 .
Alternative Methods .
Meminjam
|
Pinjaman
|
|||||||
EUR 3.000.000
|
Spot 1.0710
|
USD 3.213.000
|
||||||
90 hari pada 2.70%
|
--
|
90 hari pada 1.25 %
|
Bunga = EUR 20.250
|
--
|
Bunga = USD 10.040.625
|
TOTAL EUR 3.020.250.--
|
--
|
TOTAL USD 3.223.040.625
|
Forward rate = 3,223,040,625 / 3,020,250 = 1.06715
Customer sells EUR to USD 3,000,000 at a price of 1.06715 for 3 Months ( 1.0710-0.00385 ) .
Tanggal Transaksi
|
11 February
|
||||
EUR/USD
|
1.0710/14
|
||||
Nilai USD 3 bulan
|
1.25 / 1.35 %
|
Nilai EUR 3 Bulan
|
2.60 / 2.70 %
|
Maturity
|
90 Hari
|
Customers want to buy EUR 3,000,000 against the USD for the next 3 months .
How to calculate the purchase price for the EUR / USD 3 months Forward .
1st Method. :
Point Forward = ( ( Spot x ( 1 + ( OCR * n/360 value ) ) ) / ( 1 + ( BCR value * n/360 ) ) ) - Spot .
OCR = Other Currency Rate
BCR = Base Currency Rate
Point Forward = ((1.0714 * (1 + (0.0135 * 90/360))) / (1 + (0,026 rate * 90/360 ) ) ) - 1.0714
Swap = -0.0033
Forward rate = 1.0714 - 0.0033 = 1.0681
Alternative method :
Meminjam
|
Pinjaman
|
|||||||
EUR 3.000.000
|
Spot 1.0710
|
USD 3.213.000
|
||||||
90 hari pada 2.70%
|
--
|
90 hari pada 1.25 %
|
Bunga = EUR 20.250
|
--
|
Bunga = USD 10.040.625
|
TOTAL EUR 3.020.250.--
|
--
|
TOTAL USD 3.223.040.625
|
Forward rate = 3,225,047,925 / 3,019,500 = 1.0681
Customers buy EUR against the USD at a price of 3,000,000 for the 3 Month 1.0681 ( 1.0714-0.0033 ) .
Hopefully this article can help you in the world of Trading Trading .
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