Reply To: Why do FX Holding Instruments have Forward Rate FX Curves attached ?

Tom Graham

The Forward Rate FX curve is used to ‘price’ individual FX deals booked off the holding instrument – that is to set the default FX Dealt conversion rate for the given currency pair and forward date entered in the FX Blotter or Desktop.

If the FX Forward curve used on the FX instrument is the standard arbitrage-free forward curve – where the forward rate is calculated as the input spot rate times the ratio of the discount factors from the two currencies’ discounting curves – then an FX deal booked at the dealt rate given by this curve will initially have a net base MTM of zero.

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