BFM Numericals Solved · Part 2: Forex

Chapter 4: Forward rates, swap points and interest rate parity

How a dealer prices a currency for a later date, why the price differs from today’s, and the interest arithmetic that ties the two together.

Buyers of the e-book, or of the print copy, which includes it, read the whole chapter. Everyone can read the free sample, pages 1 to 24 of the e-book.

In this chapter

• 4.1Spot and forward: premium and discountp. 65
• 4.2Swap pointsp. 66
• The importer’s forwardp. 67
• 4.3The premium as a rate a yearp. 68
• 4.4Interest rate parityp. 69
• 4.5Covered interest arbitragep. 71
• Four 30-second routesp. 72
• 4.6Forward cross ratesp. 73
• 4.7Broken datesp. 74
• 4.8FX swapsp. 75
• 4.9The forward curvep. 76
• Which formula? A map of the chapterp. 77
• Exam traps and conventionsp. 78
• Practice: 30 questions in three roundsp. 79
• Answers, with every wrong option explainedp. 82
• Make it stickp. 85
• Chapter 4 on one pagep. 86

Corrections and updates

None for this chapter so far. Every correction to the book, and any rule that changes after its date, is listed on the errata page.