foreign exchange

AMITAG1990
Finance Junkie
Posts: 89
Joined: Sat Sep 22, 2012 12:35 pm

foreign exchange

Postby AMITAG1990 » Tue Nov 06, 2012 1:38 pm

Actually i am facing a problem in solving the foreign exchange forward value.. At some time in solution they uses a continous discounting [ e^-(Rd-Rf)] and some time they simply uses a interest parity theorem([(1+Rd)/(1+Rf)]..even in question they doesn't specifically provide whether it is a continous or not. so basically what is a idea.. when what to do..??

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balajismz
Finance Junkie
Posts: 63
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Re: foreign exchange

Postby balajismz » Wed Nov 07, 2012 4:25 pm

Garp always continuous compounding always

Balaji

AMITAG1990
Finance Junkie
Posts: 89
Joined: Sat Sep 22, 2012 12:35 pm

Re: foreign exchange

Postby AMITAG1990 » Wed Nov 07, 2012 8:21 pm

but as per interest parity we have to multiply it by it by (1+Rd)/(1+Rf)and in book also they have provided same.. but many times in question solution i founded exponential multiplication.. please team pristine through some light on this.

AMITAG1990
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Posts: 89
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Re: foreign exchange

Postby AMITAG1990 » Fri Nov 09, 2012 12:44 pm

please rply this..

content.pristine
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Posts: 356
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Re: foreign exchange

Postby content.pristine » Sat Nov 10, 2012 11:53 am

It will be given in the question whether the interest rates are annual or continuous compounding. Use the formula accordingly. In case nothing is given, use continuous.
8-)


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