I cannot for the life of me make sense of CCY forwards. I still don’t have a simple way to logically think through them and just get mixed up every time.
If I’m a Danish Investor and buy a CHF Bond, and want to hedge it.
DKK/CHF Spot and FWD Rates
BID ASK Bid PTS. ASK PTS
Spot. 7.4936. 7.6442 241.5 1007.7
I’m selling/delivering CHF forward, and will be receiving DKK
My thought process is either:
(A) If I think of this as selling CHF, I think "I’m selling CHF, and should expect to get fewer DKK, so i should use Spot Bid + fwd bid pts (7.4936 + 241.5/10000)
(B) If I think of this as buying DKK, I think "I’m buying DKK, and should expect for that to cost me more CHF, so i should use Spot Ask + fwd ask pts (7.6442 + 1007.7/10000)
Now I know (A) is incorrect. But I just don’t seem to understand how to think about it the right way each time.
Any sort of way to remember this would be greatly appreciated.
Thanks