Example (page 5)On May 24, 2010 the treasurer of acorporation enters into a long forwardcontract to buy 1 million in six months at anexchange rate of 1.4422 This obligates the corporation to pay0$1.442,200 for 1 million on November 242010Whatare the possible outcomes?OptionsFuturesandOtherDerivatives,8thEditionCopyrightJohnC.Hull201211
Example (page 5) On May 24, 2010 the treasurer of a corporation enters into a long forward contract to buy £1 million in six months at an exchange rate of 1.4422 This obligates the corporation to pay $1,442,200 for £1 million on November 24, 2010 What are the possible outcomes? Options, Futures, and Other Derivatives, 8th Edition, Copyright © John C. Hull 2012 11
Profitfroma Long ForwardPosition (K= delivery price-forward price attime contract is entered into)t ProfitPrice of UnderlyingatMaturity,SrKOptionsFutures,andOtherDerivatives,8thEditionCopyrightJohnC.Hull201212
Profit from a Long Forward Position (K= delivery price=forward price at time contract is entered into) Options, Futures, and Other Derivatives, 8th Edition, Copyright © John C. Hull 2012 12 Profit Price of Underlying at K Maturity, ST