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Forward foreign exchange rate formula

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 Description of the Forward foreign exchange rate formula

Formula for the calculation of a forward foreign exchange (FX) rate of a currency pair.

  Formula

\[ C_{f} = C_{s} \cdot \frac{\left ( 1 + i_{p} \cdot \frac{n}{N_{p}} \right )}{\left ( 1 + i_{b} \cdot \frac{n}{N_{b}} \right )} \ \]

 Symbols

\(C_{s}\ \)       
Spot exchange rate
\(i_{b}\ \)       
Interest rate for a deposit on n days in base currency
\(i_{p}\ \)       
Interest rate for a deposit on n days in price currency
\(n\ \)       
Number of days between spot date and delivery date of the forward
\(N_{b}\ \)       
Number of days per year for the deposit in base currency (360, 365 or 366 depending on day-count convention)
\(N_{c}\ \)       
Number of days per year for the deposit in price currency (360, 365 or 366 depending on day-count convention)