Payoff in forward and futures currency contracts

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GrooveCoverage

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Need some clarification here. You’re given below:
Time 0: Spot: X ; Forward/Futures: Y
Time T: Spot A: Forward/Futures: B
Say you hedge the forward contract by selling/shorting the forward/futures.
Futures payoff = (Y - B) X NP
Forward payoff = (Y - A) X NP.
Am I right?
 
currency contracts have something extra.
for both futures and forwards:
Payoff to the long:
(Spot / Foreign interest rate - Forward / Domestic interest rate) = payoff per NP
*watch out for units
 
igor555 you are right. i just double checked.
Sorry about the wrong msg Groove.
 
I saw an example that includes the change in future price but can not locate it now…
 
passme,
I am not referring to interest rate parity. More towards the formula in a currency forward or currency futures payoff.
They are slightly different in that the payoff for the futures is the difference between the contracted and the current futures rate (not spot - for forward).
 
Help with these payoffs….I think I am getting confused.
If interest rates are identical and stable and credit risk was assumed to be the same for both, I thought that future and forward payoffs were identical (since daily settlement is the primary difference).
The equations above indicate otherwise…..
Why are they different? Where are you getting these payoffs from?
Is it possible that the example with the future was before expiration (hence needing to pay the future price at time T) and the forward was at expiration? At which case the forward price is the spot price becuase they converge.
 
There is a example says manager hedge the position with a future that has settlement date longer than investment horizon.
ie: he will receive foreign currency at June but hedge this transaction with a future delivery at July….
I can not locate where it is…
 
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