Covered interest rate parity - forward rate

[FrankCFA]

Why currency forward rate formula is below?
instead of
F= S*(1+RA)^T/(1+RB)^T ; T= (days/360)
I think it’s more close to forward rate general form F=S* (1+R)^T??

 

[S2000magician]

The Economics reading assumes that interest rates are nominal (e.g., LIBOR) while the Derivatives reading assumes that they’re effective.
I wrote an article on this: http://financialexamhelp123.com/mark-to-market-value-of-a-currency-forwa.... At the bottom there’s a reconciliation of the Econ and Derivatives formulae.

 

[FrankCFA]

S2000magician wrote:
The Economics reading assumes that interest rates are nominal (e.g., LIBOR) while the Derivatives reading assumes that they’re effective.
I wrote an article on this: http://financialexamhelp123.com/mark-to-market-value-of-a-currency-forwa.... At the bottom there’s a reconciliation of the Econ and Derivatives formulae.

Wow, cool! Financial Exam Help 123
Sorry i’m not really sure what nominal and effective means@@
Could you please help eleborate it? Thanks.

 

[S2000magician]

FrankCFA wrote:

S2000magician wrote:The Economics reading assumes that interest rates are nominal (e.g., LIBOR) while the Derivatives reading assumes that they’re effective.
I wrote an article on this: http://financialexamhelp123.com/mark-to-market-value-of-a-currency-forwa.... At the bottom there’s a reconciliation of the Econ and Derivatives formulae.

Wow, cool! Financial Exam Help 123
Sorry i’m not really sure what nominal and effective means@@
Could you please help eleborate it? Thanks.

Here’s the article I wrote on that very question: http://financialexamhelp123.com/nominal-vs-effective-interest-rates/.

 

[FrankCFA]

S2000magician wrote:

FrankCFA wrote:

S2000magician wrote:The Economics reading assumes that interest rates are nominal (e.g., LIBOR) while the Derivatives reading assumes that they’re effective.
I wrote an article on this: http://financialexamhelp123.com/mark-to-market-value-of-a-currency-forwa.... At the bottom there’s a reconciliation of the Econ and Derivatives formulae.

Wow, cool! Financial Exam Help 123
Sorry i’m not really sure what nominal and effective means@@
Could you please help eleborate it? Thanks.

Here’s the article I wrote on that very question: http://financialexamhelp123.com/nominal-vs-effective-interest-rates/.

Cool! Magic.
Many thank!

 

[S2000magician]

My pleasure.