A dealer is contemplating trade opportunities in the CHF/GBP currency pair. The following are the current spot rates and forward points being quoted for the
CHF/GBP currency pair:
Spot rate (CHF/GBP) 1.4939/1.4941
One month –8.3/–7.9
Two months –17.4/–16.8
Three months –25.4/–24.6
Four months –35.4/–34.2
Five months –45.9/–44.1
Six months –56.5/–54.0
The all-in rate that the dealer will be quoted today by another dealer to sell the CHF six months forward against the GBP is closest to:
A. 1.48825.
B. 1.48835.
C. 1.48870.
In this sum which is done in the class video (class 3 of currency), sir states that this is an FX swap and hence it is calculated as per mid rate of spot bid and ask.
While in the solution of this it is taken ask rate only for calculation of 6 months forward rate.
As nothing is mentioned about squaring the current position and taking a fresh future position, I am confused whether it is a normal forward contract or it is an swap.
Kindly guide.
FX Swap, in simple words, is a combination of a spot and a forward transaction in currency.
Here, there clearly is no spot transaction and thus this is not an example of FX swap. It is a forward contract.
I think the answer is C. Is it correct?
Is the answer C?
Yes, I believe the answer should be C