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IRPT & Forward Rates

Forums › CIMA Forums › IRPT & Forward Rates

  • This topic has 1 reply, 2 voices, and was last updated 6 years ago by Ken Garrett.
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  • May 29, 2019 at 3:01 pm #517835
    sureena
    Member
    • Topics: 29
    • Replies: 11
    • ☆

    The CIMA text says:
    IRPT implies that a money market hedge should give roughly the same result as a forward contract, as forward exchange rates are derived from spot rates and money market interest rates.

    I am a little confused. How does the IRPT forecast of forward rates relate to the forward rates used in forward contract whereby either a discount or premium is added or subtracted from the prevailing spot rate?

    May 29, 2019 at 3:07 pm #517841
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10606
    • ☆☆☆☆☆

    See page 83 of our notes.

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