While marking to market a forward contract, we net our buy/sell rate with an offsetting contract of same maturity. I don’t understand why do we take the opposite side here.
In FRA (derivatives) we just take the new forward value of the same maturity and net it and bring it to present.
What am I missing?
You always take opposite sides to close out a position. That’s true with options, futures, forwards, stocks, bonds, etc.
The mark to mark on an FRA has you calculate the current price to mark to mark the position.
But even in currency aren’t we taking the current rates for few months forwards ?
Yes you are, but there’s a spread in the currency so you have to take the right bid or ask.
On the fowards contract, do you see a bid/ask?
What’s funny is after all that FX studying, we’ll probably get a single afternoon Econ vignette on a bunch of qualitative questions on economic growth and current crisis. I’m not complaining if that happens.
Haha i hope thats not the case