The formulae for valuing all derivatives are essentially the same: \[Value\ =\ PV\left(what\ you\ will\ receive\right)\ –\ PV\left(what\ you\ will\ pay\right)\] The one valuing formula that needs some explanation is the formula for valuing a currency forward; it is slightly different from the other formulae, but the difference is never explained. Here goes: Given: \(V_t\): […]
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