Suppose that the spot exchange rate between USD and GBP is USD/GBP 1.5814; i.e., USD1.5814 = GBP1.0. If the 1-year forward exchange rate is USD/GBP 1.5660 (so USD1.5660 = GBP1.0), then we say that the GBP is trading at a (one-year) forward discount (versus the USD): the forward price for GBP1.0 is lower than the […]
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