Why is it that a number of days into the Forward contract, the formula is new spot rate divided by the foreign risk free rate, and forward price divided by the domestic rate?
Does anybody know? thanks.
Why is it that a number of days into the Forward contract, the formula is new spot rate divided by the foreign risk free rate, and forward price divided by the domestic rate?
Does anybody know? thanks.
I wrote an article explaining the derivation of the formula: http://financialexamhelp123.com/valuing-a-currency-forward-whence-came-that-formula/