Four user interfaces:
- Data API.
- Excel Add-ins.
- GUI APP. Download GUI
- Analytic API.
FinPricing provides valuation tools for the following FX products:
|1. Currency Forward Introduction|
A currency forward or FX forward is a contract agreement between two parties to exchange a certain amount of a
currency for another currency at a fixed exchange rate on a fixed future date. Currency forwards are effective hedging
vehicles that allow buyers to indicate the exact amount to be exchanged and the date on which to settle in the forward
By locking into a forward contract to sell a currency, the seller sets a future exchange rate with no upfront cost.
Currency forward settlement can either be on a cash or a delivery basis, provided that the option is mutually
acceptable and has been specified beforehand in the contract. Forward contracts are one of the main methods used to
hedge against exchange rate volatility, as they avoid the impact of currency fluctuation over the period covered by
Currency forwards are over-the-counter (OTC) instruments. Unlike standardized FX future,
a FX forward can be tailored to a particular amount and delivery period. If an investor will receive a cashflow
denominated in a foreign currency on some future date, that investor can lock in the current exchange rate by
entering into an offsetting currency forward position that expires on the date of the cashflow.
The currency forward contracts are usually used by exporters and importers to hedge their foreign currency payments
from exchange rate fluctuations. By using FX forward contracts, investors can protect costs on products and services
purchased abroad and protect profit margins on products and services sold abroad by locking-in exchange rates as much
as years in advance.
Currency forwards can also be used to speculate and, by incurring a risk, attempt to profit from rising or falling
exchange rates. A currency forward contract has credit risk. In the case that one of the parties is unable to fulfill
its obligation, the other party will have to sign another contract with a third party, thus being exposed to
market risk at that time. By locking-in the exchange rates at which the currency will
be bought, the party forfeits the opportunity of profiting from a favorable exchange rate movement.
|2. Forex Market Convention|
One of the biggest sources of confusion for those new to the FX market is the market convention. We need to make clear the meaning of the following terms in the forex market first.
|3. FX Forward Rate|
The FX forward rate can be represented as
Here we want to emphasize that the discount factors of base currency and quote currency are derived from currency yield curves rather than LIBOR or treasury curves. This is another distinguished feature in the FX market.
|4. Pricing FX Forward Contracts|
The present value of a currency forward contract is given by
The above description tells us that FX forward rates and FX forward contracts are different subjects/entities. Sometimes people are confused about them.
|6. More Details|
Click the following links for more details.