FX FORWARD TRANSACTION

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 Bid Rate Ask Rate
EUR/USD Spot 1,0640 1,0642
EUR/USD ON 1,06411 1,06436
EUR/USD 1W 1,06424 1,06448
EUR/USD 1M 1,0650 1,0653
EUR/USD 2M 1,0670 1,0644
EUR/USD 3M 1,0683 1,0688
EUR/USD 4M 1,0697 1,0702
EUR/USD 5M 1,0717 1,0722
EUR/USD 6M 1,0733 1,0738
EUR/USD 7M 1,0748 1,0755
EUR/USD 8M 1,0771 1,0777
EUR/USD 9M 1,0787 1,0792
EUR/USD 10M 1,0804 1,0811
EUR/USD 11M 1,0832 1,0840
EUR/USD 12M 1,0850 1,0857 16
 Bid Rate Ask Rate
EUR/USD Spot 1,0640 1,0642
EUR/USD ON 1,1 1,6
EUR/USD 1W 2,4 2,8
EUR/USD 1M 10 11
EUR/USD 2M 30 2
EUR/USD 3M 43 46
EUR/USD 4M 57 60
EUR/USD 5M 77 80
EUR/USD 6M 93 96
EUR/USD 7M 108 113
EUR/USD 8M 131 135
EUR/USD 9M 147 150
EUR/USD 10M 164 169
EUR/USD 11M 192 198
EUR/USD 12M 210 215 17
0000 Bid Rate Ask Rate
USD/VND Spot 22.700 22.707
USD/VND ON 2 3
USD/VND 1W 13 17
USD/VND 1M 56 63
USD/VND 2M 127 134
USD/VND 3M 189 202
USD/VND 6M 253 276

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 Bid Rate Ask Rate
USD/JPY Spot 113,62 113,63
USD/JPY ON 8 6
USD/JPY 1W 24 23
USD/JPY 1M 89 83
USD/JPY 2M 282 279
USD/JPY 3M 426 423
USD/JPY 6M 927 915
USD/JPY 9M 1.486 1.470
USD/JPY 11M 1.959 1.923
USD/JPY 12M 2.130 2.110

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 Spot rate
Interest
rate

Duration

Forward
Exchange Rate
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 INTEREST RATE INTEREST RATE FORWARD
TERMS FORWARD RATE
(USD) (JPY) POINT

SPOT 108.73

1 month 0.4695% -0.0634%

2 months 0.5646% -0.0471%

3 months 0.6813% -0.0303%

6 months 0.9854% -0.0083%

12 months 1.3284% 0.0886%

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 FX Position Cash Flow Position
Transaction (USD) USD VND
1. Sign the forward contract
to buy 1 USD. Tenor: 1
year. Forward rate: Fbid
2. Sell USD for VND in
Interbank Market @ Sbid
3. Borrow USD for 1 year
in Interbank Market.
Interest: iask(USD)
4. Invest VND for 1 year in
Interbank Market. Interest:
ibid(VND)
0 0 0 49
Net Position
 FX Position Cash Flow Position
Transaction (USD) USD VND
1. Sign forward contract to +1
buy 1 USD. Tenor: 1 year.
Forward rate: Fbid
2. Sell USD for VND in 𝟏 𝟏 Sbid
− − +
[𝟏 + 𝐢𝐚𝒔𝒌 USD ] [𝟏 + 𝐢𝒂𝒔𝒌 USD ] [𝟏 + 𝐢𝒂𝒔𝒌 USD ]
Interbank market @ Sbid
3. Borrow USD for 1 year iask(USD) 1
− +
[𝟏 + 𝐢𝐚𝒔𝒌 USD ] [𝟏 + 𝐢𝐚𝒔𝒌 USD ]
in Interbank market.
Interest: iask(USD)
4. Invest VND for 1 year in Sb𝑖𝑑
+
[𝟏 + 𝐢𝒂𝒔𝒌 USD ]
Interbank market. Interest:
ibid(VND)
Net Position 0 0 0 50
 FX Cash Flow Position
Transaction Position USD VND
(USD)

1. Exercise the forward +1 - Fbid

contract
2. Pay off principal and -1
interest in USD
Sbid[1 + 𝑖𝑏𝑖𝑑 VND ]
3.Receive principal and [1 + iask USD ]
interest in VND
Sbid[𝟏 + 𝐢𝒃𝒊𝒅 𝑽𝑵𝑫 ]
Net Position − 𝐅𝐛𝒊𝒅
0 0 [𝟏 + 𝐢𝐚𝒔𝒌 𝑼𝑺𝑫 ]
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 FX Position Cash Flow Position
Transaction (USD) USD VND
1. Sign forward contract to
sell USD. Tenor: 1 year.
Forward rate: Fask
2. Buy USD in Interbank
market @ Spot rate: Sask
3. Deposit USD in
Interbank market. Tenor: 1
year. Interest rate: ibid (USD)
4. Borrow VND in
Interbank market. Tenor: 1
year. Interest rate: iask(VND)
Net Position 0 0 0
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 FX Position Cash Flow Position
Transaction (USD) USD VND
1. Sign forward contract to -1
sell USD. Tenor: 1 year.
Forward rate: Fask
2. Buy USD in interbank 1 1 Sask
+ + −
market @ Spot rate: Sask [1 + ibid USD ] [1 + ibid USD ] [1 + ibid USD ]

3. Deposit USD in ibid(USD) 1

+ −
Interbank market. Tenor: 1 [1 + ibid USD ] [1 + ibid USD ]
year. Interest rate: ibid (USD)
4. Vay Borrow VND in Sask
+
Interbank market. Tenor: 1 [1 + ibid USD ]
year. Interest: iask(VND)
Net Position 0 0 0 57
 FX Cash Flow Position
Transaction Position
(USD) USD VND

1. Exercise the forward -1 + Fask

contract
2. Receive principal and +1
interest in USD
3. Pay off principal and Sask[1 + 𝑖𝑎𝑠𝑘 VND ]
−
interest in VND [1 + i𝑏id USD ]

S𝐚𝒔𝒌[𝟏 + 𝐢𝐚𝒔𝒌 𝐕𝐍𝐃 ]

Net Position 𝐅𝐚𝒔𝒌 −
0 0 [𝟏 + 𝐢𝐛𝒊𝒅 𝐔𝐒𝐃 ]
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FPb(𝑨/𝑩) FP𝒂(𝑨/𝑩) = S𝒂(iaV − ib𝑨)T
=
S b(ib B − ia𝑨)T 61
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 Fixed cost  Eliminate profitable
 Reduce or eliminate exchange rate movements.
currency risk.  Irrevocable contract
 Control cash flow
effectively.
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  Elimimate profitable
 Fixed income exchange rate movements.

 Reduce or eliminate market  Irrevocable contract.

risk

 Control cash flow effectively

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• Difficult to find
partner (matching • Large spread
both value date and • Irrevocable contract
amount) • Margin requirement
• Eliminate profitable
exchange rate
movements.

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