首页 | 学习中心 | 注册 登录
返回列表 发帖
troymo

Rank: 2

UID
223438 
帖子
280 
主题
8 
注册时间
2011-7-11 
最后登录
2016-4-19 
1# 跳转到 » 倒序看帖
打印
tT
发表于 2013-4-22 06:04 | 只看该作者

RM for Swaps - Q11 Page 534, Vol5

534, why, contract, currency, convert
Gide used a six-month forward currency contract to convert yen to euro - So why is the Euro Area 6 month annualized rate the answer?
Just can’t connect the dots…
收藏 分享

soddy1979

Rank: 2

UID
223298 
帖子
283 
主题
144 
注册时间
2011-7-11 
最后登录
2013-9-10 
2#
发表于 2013-4-22 06:04 | 只看该作者
i trip on this question everytime i see it.
my problem is i always use exponential to calculate the rate.
Without the question hints you “30 day convention”, we just use exponents right?

TOP

LorrinCFA

Rank: 2

UID
223382 
帖子
296 
主题
72 
注册时间
2011-7-11 
最后登录
2014-8-4 
3#
发表于 2013-4-22 06:05 | 只看该作者
30 / 360 day convention - is only used for LIBOR contracts.
and here it would be [1 + r * N/360].
for anything else - EAR, BEY, calculation of Forwards from Spots - which are not based on LIBOR - use the (1+r) ^(X/12) – for months of N/365 for Days.
This convention is also consistent with the “conversion of Interest Rate Puts/Calls for the EAR calculation” at that time use the 365/X in the exponent.
—-

TOP

hw0799

Rank: 2

UID
223385 
帖子
272 
主题
42 
注册时间
2011-7-11 
最后登录
2016-4-18 
4#
发表于 2013-4-22 06:05 | 只看该作者
as Gide has hedged the currency risk exposure, she will be earning Yen risk free rate + interest rate differential

TOP

cv4cfa

Rank: 2

UID
223463 
帖子
346 
主题
15 
注册时间
2011-7-11 
最后登录
2013-8-23 
5#
发表于 2013-4-22 06:05 | 只看该作者
he is expecting 50 Mill $ delivery in 6 months.
Current Spot = 1.1930 USD/EUR - Euro amount = 50 /  1.1930 = 41.911 Mill Eur.
Now if Euro depreciated - he will lose on the amount of USD he gets back. He buys a 50M USD Forward contract . he is thus guaranteed the forward rate of 1.2030 –  which translates to the 2.13% 6 month rate.
1.1930 * (1 + .0377*.5) /  (1+0.0213*0.5) = 1.2026 – 1.2030 approx.

TOP

firat

Rank: 2

UID
223434 
帖子
332 
主题
9 
注册时间
2011-7-11 
最后登录
2014-8-7 
6#
发表于 2013-4-22 06:06 | 只看该作者
rough (quick) estimation :
Yen risk free rate + interest rate differential = 0.066 + (2.13 - 0.066) = 2.13

TOP

genuinecfa

Rank: 2

UID
223423 
帖子
370 
主题
14 
注册时间
2011-7-11 
最后登录
2014-8-7 
7#
发表于 2013-4-22 06:06 | 只看该作者
Isn’t this the Euro contract we are talking about?

TOP

agulani

Rank: 2

UID
223253 
帖子
263 
主题
121 
注册时间
2011-7-11 
最后登录
2016-4-19 
8#
发表于 2013-4-22 06:06 | 只看该作者
now we start from how hedging with forward works…
You have an asset dominated in yen (receive within 6months). To hedge the position (yen depreciation), you borrow yen (and pay japan risk free rate charge), convert to eur at spot rate (you locked the position at spot rate), loan the eur received (6months) to get EU risk free rate return.
If the forward is fairly priced, the forward rate will incorporate the spot rate and difference between the 2 risk free rate as mentioned above.
ie forward (exchange) rate (sell yen) = spot rate (Y/E)* (1 + Ry)/(1+Re)
Ry - risk free of yen / Re …eur
In this case, the forward is fairly priced so you will receive the amount of eur = spot amount + risk free rate (EU) -  the risk free rate is the answer.

TOP

Windjammer

Rank: 2

UID
222305 
帖子
379 
主题
21 
注册时间
2011-7-2 
最后登录
2015-12-5 
9#
发表于 2013-4-22 06:07 | 只看该作者
I gave it to you above;
1.1930 * (1 + .0377*.5) / (1+0.0213*0.5) = 1.2026 – 1.2030 approx.
It was a USD/EUR - so using IRP - US rate on top, EUR rate on the denominator.

TOP

返回列表