1. avatar says

    US$/£1 CAD/£1 JPY/£1
    Spot 1·5938–1·5962 1.5690–1·5710 131·91–133·59
    3-month forward 1·5996–1·6037 1·5652–1·5678 129·15–131·05

    Kindly show me how to calculate the mid rates for each set?

  2. Profile photo of kakataj says

    Hello sir ,
    with reference to P4 june 2014 exam, Question # 1,part (a) answer
    the examiner predict 4 month future price by..

    (spot rate now + ((6 month future – spot rate now )x4/6)

    there is confusion here whether basis is (spot – future price) or ( future – spot price )
    please make comment

    • Profile photo of John Moffat says

      Futures give the right to buy the currency at a fixed price on a future date (even though that is not the way we generally use them).

      If you were to buy a future on its last day then automatically you would therefore expect it to be the same as the spot rate because you would be buying the right to buy the currency on the same day.

  3. Profile photo of questforknowledge says

    hi John i have some issues with the arithmetic here. in calculating tha future price from basis you subtracted spot rate from future price (1.4900-1.5100) to -0.0200, suppose i subracted future price from spot rate i will get 0.0200 instead. on the the date of the transaction the basis will have fallen to .0067 , to get the future price should i add this .0067 to the mid market rate (1.5250 +1.5370) = 1.531 or should i subtract it. in your lecture its subtracted. my question may sound stupid but but i have been having little problems like this and subtract or adding will give a different future price which will definitely determine if i exercise an option or allow it to lapse
    thank you

    • Profile photo of John Moffat says

      Mike does not teach P4!! :-)

      The currency of the profit or loss on the future is always the opposite currency to that in which the contract size is quoted in.

      So……if we are looking at £/$ futures, then if the contract size is quoted in £’s then the profit/loss will be in $’s. If the contract size was quoted in $’s then the profit/loss would be in £’s.

      (And I guess you are happy with the fact that if the profit/loss is not in our own currency then we need to convert it at spot on that date)

      • Profile photo of questforknowledge says

        thank you John and excuse me i meant to write John and not Mike. Just that i have been used to asking questions to mike to. That is quite easy to remember in the exam hall

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