Forward spread is expressed by premium, discount and flat price. Premium means that the forward exchange rate is more expensive than the spot exchange rate; Discount means that the forward exchange rate is cheaper than the spot exchange rate; Parity means that the forward exchange rate equals the spot exchange rate. Because the pricing method of exchange rate is different, the method of calculating forward exchange rate according to forward price difference is also different.
Spot exchange rate, also known as spot exchange rate, refers to the current price of a currency in the spot market. It is the exchange rate for delivery within two working days after the two parties reach a foreign exchange transaction agreement. This exchange rate is generally the current exchange rate in the foreign exchange market.
The spot exchange rate is determined by the relationship between supply and demand of money at the time of spot delivery. The exchange rate listed in the general foreign exchange market generally refers to the spot exchange rate, except the forward exchange rate.
Extended data:
The delivery period of foreign exchange transactions can be divided into spot exchange rate and forward exchange rate. The so-called delivery means that the buyer and the seller perform the transaction contract, giving and receiving money and goods. The delivery of foreign exchange transactions refers to the behavior that the buyer pays the domestic currency and the seller pays the foreign exchange. Due to different delivery dates, the exchange rate is different.
Spot exchange rate, also known as spot exchange rate, is the exchange rate used by buyers and sellers for foreign exchange delivery within two business days after the transaction.
Forward exchange rate, also known as forward exchange rate, is the exchange rate agreed by buyers and sellers in advance for foreign exchange delivery on a certain date in the future.
In forward foreign exchange transactions, there are generally several trading methods, namely:
Direct forward foreign exchange trading: refers to trading directly in the forward foreign exchange market without corresponding trading in other markets. Banks usually don't quote the forward exchange rate in full, but use the difference between the forward exchange rate and the spot exchange rate, that is, the basis point quotation. The forward exchange rate may be higher or lower than the spot exchange rate.
Forward foreign exchange trading based on options: companies or enterprises usually don't know the exact date of their foreign exchange income in advance. Therefore, foreign exchange options can be traded with banks, which gives enterprises the right to execute forward contracts within a certain period after the trading date, such as 5-6 months. Forward foreign exchange transactions combining spot and forward. Forward trading quotation
In forward foreign exchange transactions, foreign exchange quotation is more complicated. Because the forward exchange rate is not the realized exchange rate that has been delivered or is being delivered, but the forecast of future exchange rate changes based on the spot exchange rate. We will introduce it in the later analysis of difficulties. Expression of basic terms
In forward foreign exchange transactions, you can often see many technical terms, which make beginners very confused, so it is necessary to understand these terms here.
Premium: When the forward exchange rate of a currency in the foreign exchange market is higher than the spot exchange rate, it is called premium. For example, in the spot foreign exchange market, the exchange rate of the US dollar against the German mark is 1: 1.75, and the exchange rate of the US dollar against the German mark for three months is 1: 1.7393. At this moment, Mark rises in the water.
Discount: When the forward exchange rate of a currency in the foreign exchange market is lower than the spot exchange rate, it is called discount. For example, in the spot foreign exchange market, the exchange rate of the US dollar against the German mark is 1: 1.7393, and the exchange rate of the US dollar against the German mark for three months is 1: 1.75. At this point, Mark is very attentive.
Arbitrage exchange rate: the value relationship between two currencies usually depends on their respective exchange rates against the US dollar. For example, 1 GBP =2 USD, while 1.5 DM = 1 USD, then 3 DM = 1 GBP, and the exchange rate between two non-USD is called the arbitrage exchange rate.
Reference source: Baidu Encyclopedia-spot exchange rate