SpotForward Quotations for Euro and Yen Euro SE Mid Bid Ask

Spot/Forward Quotations for Euro and Yen Euro (S/E) Mid Bid Ask Mid Bid Ask Spot 1.0899 1.0897 1.0901 118 32 118.27 118.37 Cash 1 mo 1.0917 17 19 117.82 51 -50 Rates 3 mo 1.0953 53 54 116.91 -143 140 6 mo 1.1012 112 113 115.45 288-287 9 mo 1.1075 175 177 114.00 435 429 Swap 2 yr 11401 481 522 106.93 -1150 1129 Rates 3 yr 11679 750 810 101.09 -1748 -1698 1/Bid E Ask A 1/Ask E- Bid a Spot bid rate in E/$? Spot ask rate in E/S? Mid rate - (bid + ask) 12 Spot mid rate in E/S? bid/ask spread- (ask rate- bid rate)/ ask rate bid/ask spread for /S spot? outright forward quotes: Forward rate- points + spot rate Euro 6-month forward bid rate Euro 6-month forward ask rate? Bid/Ask spread for euro 6-month forward? Appreciating or Depreciating? Calculate the annual % premium/discount on 9-month € forward (using rates provided in the Table above)?

Solution

Soln : Spot rate in $/€ , Bid = 1.0897, Ask = 1.0901

Spot rate in €/$ are : Bid = 1/1.0901 = 0.9173 , Ask = 1/1.0897 = 0.9177

Spot Mid Rate in €/$ = (Ask+Bid)/2 = ( 0.9177 + 0.9173)/2 = 0.9175

Bid ask spread = (ask - bid)/ask = (0.9177-0.9173)/0.9177 = 0.00044

€ 6 month forward rate , bid rate = 1.1012 + 0.0112 = 1.1124 , ask rate =1.1012 + 0.0113 = 1.1125

6 month forward spread = 0.0001/1.1125 = 0.00009

€ is appreciating here forward rate are more than spot rate for $/€

Annual Premium/discount = (0.0176/1.1075)* 12/9 = 2.12%

We have taken here 176 points as mid rate of 9 month forward (175+177)/2 = 176 = 0.0176

And Spot rate = 1.1075