Windjammer

in earlier post, a San Francisco, Fire Department method introduced by some one.
1st, there are always the 2 part in calculation, and sum them.
Spot/(1+Rf) and Forward/(1+Rd)

2nd, decide negative or positive sign for each of them.
if buying FC, "+" for "Spot/(1+Rf) " , because Rf is in denominator;
meanwile ,shorting DC, "-" for "Forward/(1+Rd) " , because Rd is in denominator.

If buying DC, "+" for " Forward/(1+Rd) "
meanwile ,long FC, "-" for "Spot/(1+Rf) "

in the maple case, DC is CAD, and long FC-EURO.
Spot/(1+Rf) - Forward/(1+Rd) =1.64/(1.045)^.5-1.63/(1.03)^.5


and both S and F , should be in indirect currency quote, i.e. DCX.XX / FC1.0



Edited 1 time(s). Last edit at Wednesday, June 2, 2010 at 10:37AM by annexguy.