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How to calculate closing futures rate when variable currency is appreciating
and future spot rate is not givenThank you
Whether the currency is appreciating or depreciating, we estimate the futures rate by assuming that the basis (the difference between the spot rate and the futures rate) falls linearly to zero over the life of the future.
You will find a full explanation, together with worked examples, in the free lecture (using the free Lecture Notes that go with the lectures).
(I have deleted your email addresses because they could attract spam. We are only able to answer questions in the Ask the Tutor Forum – not by private email.)
In the latest article in student accountant on currency by William Parrott
he came out with the following close out rates:On 26 August the following was true:
Spot rate – $/£ 1.65770
September futures price – $/£1.65750Could you please show how he arrived at them?
thank youRegarding the article – those rates are not calculated. They are the rates as at 26 August – both rates change from day to day and he is using those rates to illustrate how futures work.
Regarding the free notes, click on ‘ACCA’ from the home page, then “P4”. There you will find a list of all the free resources. However there is no point in just using the notes on their own – they are Lecture Notes to be used with the free lectures. It is in the lectures that we work through the examples, and explain and expand.
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