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FX Strategy Simulation: Forward Contract

FX Strategy Simulation - Forward Contract: To put the concept of a forward contract into practice, this foreign exchange (FX) strategy simulation uses the FX Derivative Speculator to demonstrate the economics and accounting of a foreign currency forward contract using the default accounting treatment to help reinforce the following two points:

  1. The functional currency value of the forward at any point in time is equivalent to the difference between the forward rate on the contract and the then prevailing forward rate in the market.
  2. The interest rate differential between the two currencies in the pair determines the forward point premium or discount applied to the spot rate to compute the "all in" forward rate.

 

 

 

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