Forward Exchange Rates

CFA Level II Derivatives
#1

In the CFA text in economics, we were told that thew forward exchange rate is:

((1+f)/(1+d))*S

However, to calculate the forward exchange rate in the derivatives book, we seem to be doing the reverse i.e.

((1+d)/(1+f))*S

I don’t understand why these formulas are different, can somebody please explain?

Thanks,

#2

I don’t know how to link posts.

In the search bar for AF, search

Forward Currency Pricing Conflicting Formulas - Econ Vs Derivatives

There’s a post from Mark666 with discussion.

#3

http://www.analystforum.com/forums/cfa-forums/cfa-level-ii-forum/91339278

#4

Ah right, that clears it up. Thanks!

#5

My pleasure.