I am not a professional, but after reading such an article, I feel that what he said is related to the LZ problem, which is also a starting point for me to understand this aspect. 1997, when Bank of China exclusively launched forward settlement and sale of foreign exchange, the four-month forward settlement price of US dollars was as high as 8.4 or even 8.5, which was much higher than the normal settlement price of around 8.27. At that time, at the beginning of the Asian financial crisis, the currencies of many Asian countries were hit and depreciated sharply, and rumors of RMB depreciation were everywhere. Many companies that don't understand the formation mechanism and calculation method of the forward settlement price announced by the Bank of China don't understand it. They are worried that it is a prelude to RMB depreciation, or represents the trend of RMB depreciation, because they think that if the RMB does not depreciate, today's settlement exchange rate will be 8.27. It will be 8.27 in four months, so the Bank of China can offer the settlement exchange rate of 8.4 in four months. If the market price is lower than 8.4, China Bank will definitely lose money, and banks will definitely not do loss-making business, which means that the RMB exchange rate will depreciate to at least 8.4 after 4 months. In fact, this is because many companies do not understand how the forward foreign exchange transaction price is formed and calculated. For example, what if you want to change dollars into yen in three months? There are two ways. One is to convert US dollars into Japanese yen and deposit it in Japanese yen for three months on a regular basis. The other is to deposit three-month fixed-term US dollars now, and then convert them into Japanese yen with interest after maturity. The yen obtained by these two methods must be the same, otherwise there will be arbitrage opportunities in the market. However, the interest rates of the US dollar and the Japanese yen are different, so the exchange rates used by the two methods are also different. The first method uses spot exchange rate, and the second method uses forward exchange rate. Therefore, the forward price is mainly formed by the spot exchange rate plus or minus the spread between the two currencies. If the US dollar (the first currency or fixed currency) is regarded as currency A and the Japanese yen (the second currency or variable currency) as currency B, their forward calculation formula is: forward exchange rate = spot exchange rate+spot exchange rate ×(B loan interest rate -A loan interest rate )× forward days ÷360 From this calculation company, it can be seen that when the spot exchange rate is determined, the forward exchange rate, if the interest rate of currency B is higher than, If the interest rate of currency B is lower than that of currency A, the bracket value is negative, and the forward exchange rate is lower than the spot exchange rate, which is called discount, and the bracket value is called discount point. When the interest rates of both currencies are determined, the longer the forward term, the larger the premium point or discount point, and the larger the spread between the forward exchange rate and the spot exchange rate. For example, the one-month interbank lending rate of USD is 2.46%, the interest rate of JPY is 0. 1 1%, and the spot exchange rate of USD/JPY is 120.45. Using these factors, we can calculate the one-month forward exchange rate of USD/JPY: one-month USD/JPY exchange rate =120.45+120.45× 0.11%-2.46 %× 30 ÷ 360. Similarly, it is not difficult to understand why the forward settlement price of China Bank at 1997 is as high as 8.4 or above. At that time, the supply of RMB capital market was in short supply, and the interbank lending rate of RMB was as high as double digits (assuming 13%), while the interbank lending rate of US dollar was less than 5%. Accordingly, the four-month forward exchange rate of USD/RMB is 4 months = 8.27+8.27×13%-5 %×120. At that time, the import and export companies convinced that the RMB exchange rate would not depreciate signed a forward settlement agreement with the Bank of China by using the higher forward settlement quotation published by the Bank of China. Other enterprises can only use the spot quotation of 8.27 to settle foreign exchange, but they can already enjoy the long-term quotation of 8.3, 8.4 or even as high as 8.5, and the export income is less than 1 100 million US dollars. These companies can make additional payments through the forward settlement business in the "foreign exchange tips" of the Bank of China. Similarly, in 1999, out of concern about US economic inflation, the Federal Reserve Bank of the United States raised the US dollar interest rate several times, which made the US dollar interbank lending rate as high as 6.5%, while the RMB interbank lending rate dropped sharply to about 3%, which made the forward settlement and sale of foreign exchange in China banks change from a large premium to a large discount, and the four-month forward sale price was less than 8.2. 8.3 The spot price nearby has been discounted to 0 1, and many companies that need to buy US dollars to pay for imports have signed forward sales contracts with Bank of China. The same amount of foreign exchange sales saved millions of RMB, which greatly improved the company's operating efficiency. The calculation formula of forward exchange rate is an important and useful formula in the international financial market. Through the calculation formula, we can find that the forward exchange rate of A/B currency has nothing to do with the future trend of the exchange rates of A and B. The discount of the forward exchange rate (lower than the spot exchange rate) does not mean that the exchange rates of these two currencies will fall in the future, but only indicates that the interest rate of A currency is higher than that of B currency. Similarly, the premium of forward exchange rate does not mean that the currency exchange rate will rise in the future, but only shows that the interest rate of currency A is lower than that of currency B, and the forward exchange rate is only related to the interest rates of two currencies, A and B, and the days of forward. Mastering this is very useful for us to use forward business to prevent exchange rate risks.