Il:ExchangeRateQuotation of the forward exchange rateDirect quotation: to show the buying rate and selling rate ofdifferent delivery periods on the quote board directlyForward margin: to show the forward exchange rate byoffering the forward exchange rate is higher or lower certainpoints than the spot exchange rate.Forward margin=forward ER- spot ER
II: Exchange Rate ❖Quotation of the forward exchange rate: ⚫ Direct quotation: to show the buying rate and selling rate of different delivery periods on the quote board directly. ⚫ Forward margin: to show the forward exchange rate by offering the forward exchange rate is higher or lower certain points than the spot exchange rate. Forward margin=forward ER- spot ER
II:ExchangeRate Three kinds of quantitative relationship between forwardexchange rate and spot exchange rate:forward premiumforward discountparity一Theforward ERislowerTheforwardERishigherTheforwardERisequathanthespotER:thethan the spot ER; theto thespot ER:theforward margin isforward margin isforward margin is zeronegativepositive
II: Exchange Rate ❖Three kinds of quantitative relationship between forward exchange rate and spot exchange rate: forward premium forward discount parity The forward ER is higher than the spot ER; the forward margin is positive The forward ER is lower than the spot ER; the forward margin is negative The forward ER is equal to the spot ER; the forward margin is zero
II: Exchange Rate If the bank offers the forward margin, how to calculate theforward exchange rate on the basis of spot exchange rate alsodepends on the quotation of the exchange rateQuotationDirect quotationIndirect quotationwhileforwardpremium,minus the premiumplus the premiumtheforwardERisamountamountequal to the spot ERwhileforward discount.minus the premiumplus the premiumthe forward ER isamountamountequal to the spot ER
II: Exchange Rate ❖ If the bank offers the forward margin, how to calculate the forward exchange rate on the basis of spot exchange rate also depends on the quotation of the exchange rate Quotation Direct quotation Indirect quotation while forward premium, the forward ER is equal to the spot ER plus the premium amount minus the premium amount while forward discount, the forward ER is equal to the spot ER minus the premium amount plus the premium amount
I:ExchangeRateEg: Supposinga bank in China quote the exchange rate between USD andCNY as follows:Spotexchangerate:$1=6.2049---59the three-month forward exchange rate is discount 80---60As China adopts the direct quotation, the three-month forward exchange rate isequal to$ 1=￥6.2049---5980---60$ 1=6.1969---99
II: Exchange Rate Eg: Supposing a bank in China quote the exchange rate between USD and CNY as follows: Spot exchange rate: ＄1=￥6.2049-59 the three-month forward exchange rate is discount 80-60 As China adopts the direct quotation, the three-month forward exchange rate is equal to ＄1=￥6.2049-59 ﹣） 80-60 ＄1=￥6.1969-99
Il:ExchangeRateBasic rate and cross rate Basic rate: the exchange rate between the national currencyand base currency. Cross rate: Generally, it is just reported the basic rate on theforeign exchange market of each country. The exchange ratebetween the national currency and the currency of othercountries can be calculated according to the basic rate, whichis the cross rate
II: Exchange Rate ❖Basic rate and cross rate ❖ Basic rate: the exchange rate between the national currency and base currency. ❖ Cross rate: Generally, it is just reported the basic rate on the foreign exchange market of each country. The exchange rate between the national currency and the currency of other countries can be calculated according to the basic rate, which is the cross rate