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  1. 1. Forwards in FX (Bloomberg) By: Iti Sharma (uemf15016)
  2. 2. Forward Contract • A contractual binding to buy or sell a specified amount of a specified foreign currency at a specified rate on a specified future date. • This is in contrast to a spot contract which is an agreement to buy or sell an asset on its spot date. – Long Forward: Commitment to BUY foreign-currency at a pre-specified rate on a given date. ( Importer buys foreign currency) – Short Forward: Commitment to SELL foreign-currency at a pre-specified rate on a given date. ( Exporter sells foreign currency)
  3. 3. Bloomberg : FX Forward
  4. 4. Bloomberg : FX Forward Bloomberg Generic Pricing (accurate market indication using proprietary algorithm) BGN : Bloomberg Generic Pricing If you actually called up a broker and asked for a quote on euro-dollar spot, you’d probably get a quote very, very on par to the BGN source. So BGN is our highest quality FX rate. It sorts of scans all FX - 6 the contributors that we have, scans the quotes, the time of last update, runs them through a proprietary algorithm, and spits back out a market-accurate price.
  5. 5. Bloomberg : FX Forward Non-Deliverable Funds (Currency hedging without physical exchange of funds)
  6. 6. Bloomberg : FX Forward Shows actual no. of points
  7. 7. Bloomberg : FX Forward Plug in no. of days to maturity or calendar date
  8. 8. Bloomberg : FX Forward Shows interest rate differential b/w two countries
  9. 9. Forwards : Direct Input
  10. 10. Forward points: Negative (CCY1 interest rate is higher than CCY2 interest rates)
  11. 11. Cross – Currency View using “via Third Currency” Composite (best market indication: listed contributors)
  12. 12. Cross-Rates Calculator (breaks down the two major currency pairs to work out the cross pair)
  13. 13. Cross – Rates Calculator View using “via Third Currency” Outrights = Spot rates + Forward points (popular with corporate customers trading on exact value date)
  14. 14. Par Forwards: Editable window Check forward rates at a particular date for a specific amount
  15. 15. Par Forwards: Editable window Compare forwards detail at different dates and for different amount
  16. 16. Par Forwards View using “via Third Currency”
  17. 17. Multi-Currency View: Editable window All currencies’ forwards detail are shown together. New currency-pair can also be added.
  18. 18. Show Charts Show the forward rates trend for last 5 years b/w selected currencies.
  19. 19. Book Forward Contract from Bank
  20. 20. Documents required are available on Bank website
  21. 21. Cancellation of Forward Contract • Take opposite position In case of Exporter: o Say the exporter books a forward contract for 31st May, 2014 on 1st January 2014 when the spot is trading at 62.00. Forward Premium for May end is Rs.2.00. The forward rate that the exporter gets is Rs. 64. o Say on 31st March, 2014, spot is trading at 61.00 and forward premium as on that date for May end is 85/87 paisa. If on 31st March, 2014, the Exporter wants to cancel the May end contract, then he will have to take the opposite position, that is, “buy dollars at Rs. 61.87”. o Here, he Sold dollars at Rs. 64, Bought dollars at Rs. 61.87 Hence exporter’s gain from cancellation: 64.00 - 61.87 = Rs. 2.13
  22. 22. Sources • URLs: – – – – – – – – – • Bloomberg • Investopedia • Wikipedia • Information edified by Prof. B.P Misra and Prof. Banikanta Mishra • Textbooks: Multinational Financial Management by Shapiro and Indian Financial Systems by Bharti Pathak