"As I explain in my lectures, forward rates are determined by the interest rates – the banks use the money markets in order to be able to arrive at a forward rate to quote to customers.
The question does not ask you to illustrate using the money markets, it just asks for the acceptable interest rate which can be calculated (as in the answer) using the formula on the formula sheet for the forward rate calculation (which is itself effectively using the money markets)."
this i understood .what my query was borrowing interest rate of switzerland is given , in this reverse money market hedge euro is deposited then borrowed at Swizz rate right ? so why we need to find out swizz borrowing rate ..Isnt missing figure is euro deposit rate?
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9y ago#1The question does give the Swiss borrowing rates, but the question asks what the minimum rate would need to be for money market hedging to be acceptable.
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