Mark-to-market Currency forward contract

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Norest

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60-day forward rate: USD/GBP= 2.0075 - 85
William decides to go long 1 million GBP (and short USD) in the 60-day forward contract.
30 days after the initiation, the exchange rate are as follows:
Quote (USD/GBP):
Spot: 2.0086/2.0089
30-day forward: +7.6/+8
60-day forward: +8.7/+9.1
90-day forward: +9.2/+9.8
(USD 30 day interest rates are given as 4%)
My questions for this particular question is
1. How do you know which bid/ask to use for the original all-in forward price?
2. How do you calculate the new all-in forward price, 30 days after initiation?
 
He bought some GBP and now want to value his position. So, in order to do this, he needs to check how much would is cost him to balance off his position; thus he has to sell GBP at the rate of valuation ie. 60 days from initiation. He uses the opposite rate which he used at the initiation. Then discount the value 60 days back using the pravailing interes rate at the days of valuation.
 
He bought GBP and now needs to sell back, so accept the bid
he sold USD and now needs to buy back, so pay the ask
once u know the bid ask u can work out the all in from the spot and the fw . Yes?
 
You buy base currency at ask and sell at bid.
jaychou wrote:
once u know the bid ask u can work out the all in from the spot and the fw . Yes?
Click to expand...
sorry, dont understand this…
 
Kindly requesting some magic in this thread :(
 
Norest wrote:
60-day forward rate: USD/GBP= 2.0075 - 85
William decides to go long 1 million GBP (and short USD) in the 60-day forward contract.
30 days after the initiation, the exchange rate are as follows:
Quote (USD/GBP):
Spot: 2.0086/2.0089
30-day forward: +7.6/+8
60-day forward: +8.7/+9.1
90-day forward: +9.2/+9.8
(USD 30 day interest rates are given as 4%)
My questions for this particular question is
1. How do you know which bid/ask to use for the original all-in forward price?
2. How do you calculate the new all-in forward price, 30 days after initiation?
Click to expand...
what so hard here? For 1) as i said he bought GBP so now if he supposed to sell it, he has to accept the current bid. Now when he bought the mid rate was .80 so now we take .80+7.6/10,000 we got the new all in bid. Remember when they ask for all in„u just focus on the spot rate TODAY, and decide which side u need, bid or aks according to the logic i stated above. Thenu adjust the mid rate today accordingly.
If they ask abt settlemtn amount, then u need to take the original amount - amount covert@ today all in
if they ask to MTM then u dont care abt mid rate , but u need to determine which side of the trade u are on (long short) to use bid or ask (long buy means pay the ask short sell means accept the bid) then net off the 2 legs and discount the amount by risk free rate.
 
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