Forward exchange rate = spot exchange rate+spot exchange rate ×(B loan interest rate -A loan interest rate )× forward days ÷360
Spot: Swiss franc/USD = (11.6040)/(11.6030) = 0.6234/0.6238.
Forward: CHF/USD = (11.5905)/(11.5890) = 0.6287/0.6293.
Swiss franc/USD 3-month forward points: (0.6287-0.6234)/(0.6293-0.6238) = 0.0053/0.0055 = 53/55.
Forward exchange rate is the symmetry of "spot exchange rate". The exchange rate of forward foreign exchange transactions. Usually stipulated in the forward foreign exchange transaction contract. When the forward contract expires, no matter how the spot exchange rate changes, the buyer and the seller shall make delivery according to the forward exchange rate stipulated in the contract. The difference between forward exchange rate and spot exchange rate is called forward spread, or forward exchange rate, which is usually expressed by premium, discount or parity.
The forward exchange rate of a country's currency is higher than the spot exchange rate, which is called premium, and the forward exchange rate is lower than the spot exchange rate, which is called discount. Both are called parity. According to exchange rate parity, forward spread usually reflects the spread between two currencies. That is, currencies with high interest rates generally show discounts, while currencies with low interest rates generally show premiums. Forward exchange rate is directly related to the profit and loss of hedging, arbitrage and speculation by using forward foreign exchange transactions.
Generally speaking, the pricing method of forward exchange rate is only to mark forward premium or discount. In the case of direct quotation, if the forward exchange rate is premium, it is the forward exchange rate based on spot exchange rate and premium; If it is a forward discount, subtract the discount from the spot exchange rate and it is the forward exchange rate. In the case of indirect pricing method, on the contrary, if the forward exchange rate has a premium, it is necessary to subtract the premium from the spot exchange rate, which is the forward exchange rate; If it is a forward discount, it is necessary to add the discount number to the spot exchange rate, which is the forward exchange rate.