If one is short a forward on a notional of $1MM and the current forward rate is 1Euro/$. Few weeks later the Forward rate is 0.95Euro/$. How does this translate into a gain for the position that is short?
Isn’t the person who is short still liable for completing the contract at 1Euro/$?
I have not gone all of the example but that is the jist of my question.
Thanks in advance.作者: simeezee 时间: 2013-4-12 22:34
he has contracted to sell something to someone for 1 MM $.
a few weeks later - he can buy what he needs to sell from the spot market at 950000 MM Euro, sell it to the counterparty, and get back 1 MM Euro which is what the contract was for.
A Short position gains when the forward contract rate drops.作者: sabina 时间: 2013-4-12 22:34
