mik82

annexguy Wrote:
-------------------------------------------------------
> 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


might be easier to just do the equation for the long and see what that value is. If positive, then the long has counterparty risk. Vice versa.