My query is that: for instance if we tended to receive the amount at 12th Sept 2004 then do we choose September futures (as the futures usually expire at the end of the month)?

Hi sir, sorry to be posting a past year question here, but the Ask tutor forum page can’t seem to be found.

From the March/June 2016 paper Question 1 LIRIO, for the currency futures calculation- I don’t get how the spot rate for the date of conversion(1 June) is found, hence I cannot find the futures rate on that date as well using the method you taught us. The answer uses – 0·8638 + (2/3 x (0·8656 – 0·8638)) = 0·8650 [This can also be done using the spot rates or forward rates] which i do not understand.

You can find the link to the Ask the Tutor Forum on the main AFM page!

The answer has apportioned between the March rate (in 1 month) and the June rate (in 4 months) to get a 3 month rate. However as the examiner states in his example you get exactly the same answer by doing it the way I explain in my lectures, which is strictly the more correct way.

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msk29 says

Hello Sir!

My query is that: for instance if we tended to receive the amount at 12th Sept 2004 then do we choose September futures (as the futures usually expire at the end of the month)?

msk29 says

Oh I get it! You use Sept futures to hedge the 12th Sept amount, as its expires at the end of month. So there is still time to hedge it before expiry.

Thank you Sir for your well explained and wonderful lectures.

soniasaw says

Hi sir, sorry to be posting a past year question here, but the Ask tutor forum page can’t seem to be found.

From the March/June 2016 paper Question 1 LIRIO, for the currency futures calculation-

I don’t get how the spot rate for the date of conversion(1 June) is found, hence I cannot find the futures rate on that date as well using the method you taught us.

The answer uses – 0·8638 + (2/3 x (0·8656 – 0·8638)) = 0·8650 [This can also be done using the spot rates or forward rates] which i do not understand.

John Moffat says

You can find the link to the Ask the Tutor Forum on the main AFM page!

The answer has apportioned between the March rate (in 1 month) and the June rate (in 4 months) to get a 3 month rate. However as the examiner states in his example you get exactly the same answer by doing it the way I explain in my lectures, which is strictly the more correct way.