Forex Risk Management by Parvesh Aghi

FOREX MARKETS
FOREX MARKET
The market for foreign exchange involves the
Purchase and sale of national currencies.
A foreign exchange market exists because
economies employ national currencies.
If the world economy used a single currency

There would be no need for foreign exchange
markets.
The foreign exchange market is extremely

active . It is primarily an over the counter
market, the exchanges trade futures and
option but most transactions are
OTC.
It is difficult to assess the actual size of the
foreign exchange market because it is traded
in many markets.
Exchange Rates /Quotes

The price of one countrys currency in terms
of another
Most currency is quoted in terms of dollars
The price of a currency in terms of another
currency is called quote
A quote where US dollar is the base currency
is refereed as direct Quote for example
$ 1= 66 , while a quote where USD is
referred to as terms currency is an indirect
quote for example 1 = $.01520
4
A direct quote is a quote where the exchange rate is

expressed in terms of number of units of domestic
currency per unit of foreign currency.
Therefore , when we say $1 = Rs 66 , we are expressing
one unit of dollar ( a foreign currency for an Indian)
in terms of some units of domestic currency
Therefore it is a dollar direct quote for an Indian in India.
( remember that the same quote when quoted in USA
is not a direct quote for an American
5
Example: Exchange Rates

Suppose you have $10,000 , how many Indian
Rupees can you buy?
Exchange rate = Rs 66.00 Rupees per dollar
Buy 10,000 (66.00) = 6,60,000 Rupees
Suppose you are visiting Bombay and you want

to buy a souvenir that costs 1000 Indian
Rupees. How much does it cost in U.S. dollars?
Exchange rate 1 = .0152
1000* .0152 = $ 15.20
6
Market Quotes:
Direct - Indirect Quotes
Direct quote is the home currency price of a

foreign currency.
Indirect quote is the foreign currency price of
the home currency.
The total sum is 200% because each currency trade always involves a currency pair.
Foreign Exchange Markets

Exchange Rate - Amount of one currency needed
to purchase one unit of another currency. $
$1= 1.62
1 = $0.617
$1 = 69
100= $ 1.449
$1 = .9478
1 = $ 1.09315
$1 = 114
100= $ .877
Spot Rate of Exchange the price of currency for

immediate delivery. Recorded by 2nd business
day
Forward Exchange Rate the price of currency
for delivery at sometime in the future.
9
American terms & European terms

American terms
US dollar price per unit of
foreign currency
European terms
Foreign currency
units per dollar
Example Rs1= $.01449

1 = $ 1.09
Example $1 = Rs 69
$1 = .9478
A direct quote in the United

States
A direct quote outside

the United States
A indirect quote outside the

United States
An indirect quote in
the United State
10
BID , ASK SPREAD

BID & ASKED :A two-way price quotation that indicates
the best price at which a security can be sold and
bought at a given point in time.
The bid price represents the maximum price that a
buyer or buyers are willing to pay for a security.
The ask price represents the minimum price that a seller
or sellers are willing to receive for the security.
The difference between the bid and asked prices, or the
spread, is a key indicator of the liquidity of the asset
- generally speaking, the smaller the spread, the
better the liquidity.
11
Bid / Ask Spread

It is common for any currency pair to be quoted
with both a bid and an ask price.
The former, which is always a lower price than
the ask, is the price at which a broker is ready
and willing to buy, which is the price at which
the trader/customer should sell. The ask price,
on the other hand, is the price at which the
broker is ready and willing to sell, meaning
the trader /customer should jump at that
price and buy.
12
Bid / Ask Spread
13
Bid / Ask Spread
14
CROSS RATE
15
Example 1
16
Example 2 :Cross Exchange Rate
17
18
CROSS RATES
19
20
Reading the FX Table

Direct quote of $ in Japan
Cross-Rates
Direct Quote of Yen in USA
RULES
Rule 1
A =
X C
B
Bid (A/B) = Bid (A/C) X Bid (C/B)

Ask (A/B) = Ask (A/C) X Ask (C/B)
Rule 2
Bid (A/B) =
Ask ( B/A)
22
RULES
Rule 1
=
X $
European
Quote
American
Quote
Bid ( /) =
Bid ( /$) X Bid ($/ )
Ask ( /) =
Ask ( /$) X Ask ($/ )
Rule 2
Bid ( /$) =
Ask ( $/ )
23
Rule 2
Bid ( /$) =
Ask ( $/ )
This is because when we want to transact in
dollars (say) we use $1= Rs 60/ 64 . It means
when we want to sell $ we would get Rs 60 and
when want to buy $ we need to give Rs 64
24
Now let us assume that we want to transact in rupees . In

that case we use 1= $ .0163/ .0156
It means when we want to sell we would get $ .0163
and when we want to buy we need to give $ .0156
Now is not selling dollar akin to buying rupees and
vice versa ? From the first quote we get dollar sale
rate as $1 = Rs 60 from the second quote we get
rupee buying rate as Rs 1 = .0156 but both the quotes
are one and the same mathematically . Hence we say,
Bid ( /$)= 1 / Ask ( $ / )
Ask (/$ ) = 1 / Bid ( $ / )
25
BID / ASK quotes

/$
$1
From
trader/customer
/investor point of view
$/
From
trader/customer
BID ( bankers $ buy

rate
ASK ( bankers $
selling rate
66
67
$ selling rate
$ buying rate
buying rate
selling rate
BID ( Bankers Rs buy rate)
ASK ( Bankers Rs sell rate)
1/67= $ .01492
1/66 = $.01515
selling rate
buying rate
$ buying rate
$ selling rate
Indian
direct
quote or
European
American
quote
26
CROSS RATE : RUPEE / EURO /

BID ( bankers
buy rate
ASK ( bankers
selling rate
66
66.5
$ selling rate
$ buying rate
buying rate
selling rate
Indian direct
quote/
European
quote
$ 1.1
$ 1.12
American quote
From trader/customer
selling rate
buying rate
$ buying rate
$ selling rate
66 X $1.1=
72.60
66.5X $1.12 =
74.48
/$
$1
$/
Indian direct
quote
27
CROSS RATE : RUPEE / POUND /

/$
$1
$ /
BID ( bankers
buy rate
ASK ( bankers
selling rate
66
67
Indian direct
quote/
European
$ selling rate
$ buying rate
buying rate
selling rate
$ 1.52
$ 1.53
selling rate
buying rate
$ buying rate
$ selling rate
66 X $1.52=
100.32
67X $1.53 = Indian direct

103.85
quote
American
quote
28
CROSS RATE : RUPEE / POUND /

/$
$1
$ /
BID ( bankers
buy rate
ASK ( bankers
selling rate
66.2550
66.2600
$ selling rate
$ buying rate
buying rate
selling rate
$ 1.5211
$ 1.5279
selling rate
buying rate
$ buying rate
$ selling rate
66.255 X
$1.5211=
100.78
66.26 X
$1.5278 =
101.23
Indian direct
quote/
European
American
quote
Indian direct
quote
29
CROSS RATE : RUPEE / YEN /

/$
$1
$/
BID ( bankers
buy rate
ASK ( bankers
selling rate
66
67
$ selling rate
$ buying rate
buying rate
selling rate
$ .0082
$ .0083
selling rate
buying rate
Indian direct
quote/
European
American
quote
$ buying rate
$ selling rate
66 X $.0082=
.5412
67X $ .0083 = Indian direct

.5561
quote
30
CROSS RATE : RUPEE / SINGAPORE DOLLAR
/$
$1
S$ /$
1$
BID ( bankers
buy rate
ASK ( bankers
selling rate
66
67
$ selling rate
$ buying rate
buying rate
selling rate
S$ 1.230
S$ 1.243
Indian direct
quote/
European
European
Quote
Bid $ /S$ = 1/ Ask S$/$ Ask $/S$ = 1/ Bid S$/$

$/S$
/ S$
1 S$
$ .804
$ .813
American
Quote
66 X $.804=
=53.064
67X $ .813=
54.47
Indian direct
quote
31
32
What are Pips in Forex

To illustrate, if the following pair were provided as such:
EUR / USD 1.2545/48 OR 1.2545/8
Then the bidding price is set for 1.2545
with the ask price set to 1.2548.
Pip :The minimum incremental move that of which is made
Possible by a currency pair is otherwise known as a pip, which
simply stands for price interest point.
For example, a move in the EUR / USD currency pair from 1.2545
to 1.2560 would be equivalent to 15 pips, whereas a move in the
USD / JPY currency pair from 112.05 to 113.05 would be
equivalent to 105 pips.
33
What are Pips in Forex
34
Exchange Rates
The exchange rate is the price that is
determined in the foreign exchange market.
Of course, there are many concepts of
exchange rate we can consider. These include:
Spot versus forward exchange rates versus
future exchange rates
Fixed versus flexible exchange rates
Nominal versus real exchange rate
35
Spot and Forward Exchange Rates

The exchange rate is simply the price of foreign
currency in terms of domestic currency.
The typical fashion is to quote the foreign
Currency price of the dollar; hence, the Rupee
has been trading at approximately Rs 66.10
to the dollar on November 12, 2015
The spot (or nominal) exchange rate refers to
The current price of foreign exchange. It is a
contract for immediate delivery, though that
might actually take a day or two.
36
A forward contract refers to a transaction for

delivery of foreign exchange at some
specified date in the future.
Suppose, for example, that a Indian company,
say Tata Motors, expects to receive $ 100,000
60 days from now. The value of these receipts
will vary with the actual value of the spot
exchange rate in the future.
The firm may wish, however, to hedge. It may
wish to reduce the risk that the rupee will
appreciate during these 60 days.
37
Consequently, it signs a contract to receive

$100,000 in 60 days at the current
exchange rate.
The company has locked in the current rate

and hedged the exchange rate risk.
38
The forward price of a currency need not be equal to

the spot price. If the market expects that the rupee
will depreciate over the next 6 months, the forward
price will be lower than the spot price.
The forward premium is a measure of the markets
expectation, and it can be expressed as:
fm = Fm-e
where m is the number of days
e
from today & Fm is forward
exchange rate. Clearly, if
fm > 0 it means that more dollars will be required to
purchase foreign exchange m days from now than
today
39
Forward contracts are usually offered by

commercial banks, and this helps to explain
the difference with futures contracts.
Banks offer their important customers forward
contracts as part of their business
relationship. It enables firms to engage in
international trade with limited exposure to
Foreign currency risk.
40
Forward premium
It's the price paid for hedging by buying
foreign currency in the forward market.
forward transactions take place at a premium
or discount to the spot rate.
The outright forward transactions are
over-the-counter transactions undertaken by
dealers. In India, it is generally the banks
that transact in forward markets.
41
The maturity date agreed upon by the parties

generally varies from months to a year or two.
But maturities beyond that tend to have wider
bid-ask spreads, in other words, tend to be
more expensive
The forward rate could be in premium or
discount, based on the interest rate differential
in case of currencies which are fully
convertible and in case of partially-convertible
currencies, they are determined purely on the
basis of demand and supply.
42
For example, in India, the USD/INR forward

rate for six months could be in premium or at
A discount over the spot rate, based on how
liquid the dollar is.
43
44
45
What determines forward premium?

Countries that have fully-convertible currencies, the
forward premium is deduced from their interest
rate differentials, respectively.
The premium/discount is measured in points, which
represent the interest rate differential of the countries
to which the currencies belong, for the period of
maturity.
These points are the quantum of foreign exchange that
would neutralise the interest rate differential
46
Forward exchange rates

According to the interest parity theory ,
forward rate are dependent on the prevailing
interest rate in the two currencies .
The forward rate can be calculated by the
following formula :
F = 1+ Rh
S
1+ Rf
Where F and S are future and spot currency
rates . Rh and Rf are Simple interest rate in the
home and foreign currency
47
If we consider continuously compounding

interest rate forward Rate can be computed
using the following formula
(rh-rf)*T
F= S * e
rh = continuously compounded interest
rates for the home currency
rf = continuously compounded interest

T
rates for the foreign currency

= Time to maturity
= 2.71828
48
Lets assume that one year rate interest rate

in US and India are say 3% and 8%
respectively and the spot rate of USD in
India is Rs 62
49
Suppose that the one year forward rate is less

than 65.18 say Rs 64 An arbitrageur can :
Borrow 1000 USD at 3% per annum for one
year and convert to Rs 62000/- and invest the
same at 8%
An amount of USD 1030.50 (1000 x 1.0305 )
has to be repaid after one year . Strategy : Buy
a forward contract for USD 1030.50 for
Rs 65952 ( Rs 64 * 1030.50)
Note : e = 1.0305
50
USD 1000 converted to Rs 62000 and

invested at 8% pa grows to Rs 67166.46
( 62000x 1.0833) of This Rs 65952 shall be
used to buy $ 1030.5 and repay the US loan
Note : e8 = 1.0833
The strategy therefore leaves a risk free
profit of Rs 1214.46 Suppose the rate was
greater than Rs 65.18 as given in the equation
above , the reverse strategy would have
worked.
51
Suppose , that the spot rate is Rs 60 per USD.

One year rate interest rate in US and India
are say 3% and 9% respectively
1.Compute the 2 year forward rate
2.If the future rate is say 66.50 .
3.Is there any opportunity of arbitrage
52
(rh-rf)*T
F= S * e
From the equation above the two year
forward rate should be
(.9-.3)*2
F = 60 *e
= 60 * 1.1275 = 67.75
Since future rate is not equal to 67.75
Arbitrage opportunity exists
Note : e12 = 1.1275
53
CA FINAL NOV 2009/ May 2010
54
55
Three year Expected Forward Rate : 1$USD
56
57
58
59
60
61
62
1$= Rs 68 to say & 70
Supplier
Rupee Dep
1 = Rs 100 to say Rs 90 Customer Rs Appre

63
64
CURRENCY DERIVATIVES
65
66
67
Lecture objectives
68
Forward Market
69
Forward Contracts
70
Forward Market
71
Forward Market
annualized forward premium/discount
= forward rate spot rate 360
spot rate
where n is the number of days to maturity
Example: Suppose spot rate = $1.401,

day forward rate = $1.398.
90-
$1.398 $1.401 x 360 = 0.86%

$1.398
90
So, forward discount = 0.86%

72
Forward Market
annualized forward premium/discount
= forward rate spot rate 360
spot rate
where n is the number of days to maturity
Example: Suppose $ spot rate = Rs 66.05 90day $ forward rate = Rs 66.95
Rs66.95 Rs 66.05 x 360 = + 5.45 %

Rs 66.05
90
So, forward premium = + 5.45%

73
FORWARD MARKET
74
Forward Contract - Example
75
76
77
78
Currency Futures Market
79
80
Forward Markets
Futures Markets
Contract size
Customized
Standardized.
Trading
Informal Over the

Counter
Traded on Exchange
Participants
Banks, brokers, MNCs.

Public speculation not
encouraged
Banks, brokers, MNCs.

Qualified Public
speculation
encouraged
Settlement
Single- Pre-specified in Daily settlement & Final

the contract
settlement
Risk
Counter party risk is

present
Exchange provides the

guarantee of
settlement & hence no
counter party risk
Marketplace
Worldwide telephone
network.
Central exchange floor

with global
communications
81
82
83
84
85
86
87
FUTURE EXAMPLES
88
HEDGING EXPORTER : SHORT

A Software Exporter would receive a payment
of USD 10,00,000 after 3 months . Suppose the
spot rate and the future 3 month rate is Rs 62 .
He expects Dollar to depreciate due to huge
increase in exports and FII inflow in India .
He would lose on account of Dollar
depreciation. He plans to hedge the
foreign currency risk
by selling dollars @ 62 in the Futures market
89
Thus Exporter is exposed to exchange rate risk , which he can

Hedge by taking a short position in the future market.
By taking short position in 1000 future contracts ( USD INR
future contract size is of 1000 USD) he can lock in the exchange
rate after 3 months at INR Rs 62/- ( Assuming 3 months future
price is 62).
Whatever may be the exchange rate after 3 months
exporter will be getting Rs 6,20,00,000
Any loss in the Spot market will get off set from the gain in the
In the future market and vice versa
90
HEDGING- SHORT
If Dollar appreciates / strengthens in
exchange rate becomes $ 1= INR 63
If the dollar depreciates/ weakens

and the exchange rate becomes$1=
INR 61
Spot Market : Exporter will receive INR

6,30,00,000 by selling I million USD in the
spot market
Spot Market : Exporter will receive

INR 6,10,00,000 by selling I million
USD in the spot market
Future Market : Exporter will lose INR

( 62-63) *1000= INR 1000 per contract .
The total loss in 1000 contracts will be
INR 10,00,000
Future Market : Exporter will gain INR

( 62-61) *1000= INR 1000 per
contract . The total gain in 1000
contract s will be INR 10,00,000
Note Contract Size = 1000 USD

Net Receipt = Rs 63 million 1 million=
Rs 62million
Net Receipt = Rs 61 million +1 million=

Rs 62 million
91
HEDGING IMPORTER - LONG

An Importer has ordered certain equipment
from US and has to make payment after
3 months .Suppose the spot rate and future
3 month rate is Rs 62 .
He expects Dollar to appreciate due to
announcement of QE tapering by Federal Bank
of America and outflow of FII .
He would lose on account of Dollar
appreciation. He plans to hedge the foreign
currency risk by buying dollars @62
In the Futures market
92
Thus Importer is exposed to exchange rate risk , which he can

hedge by taking an by taking a long position in the future market.
By taking long position in 1000 future contracts ( USD INR
future contract size is Of 1000 USD) he can lock in the exchange
rate after 3 months at INR Rs 62/- ( Assuming 3 months future
price is 62).
Whatever may be the exchange rate after 3 months
Importer will be paying 6,20,00,000
Any loss in the Spot market will get off set from the gain in the
In the future market and vice versa
93
HEDGING- LONG
If Dollar appreciates / strengthens and If the Dollar weakens/ depreciates and
the exchange rate becomes 1$= INR
the exchange rate becomes 1$=INR 60
63
Spot Market : Importer has to pay INR
Spot Market : importer will pay INR
6,30,00,000 by buying I million USD in the 6,00,00,000 by buying I million USD in
spot market
the spot market
Future Market : Importer will gain INR
( 63-62) *1000= INR 1000 per contract .
The total gain in 1000 contract s will
be INR 10,00,000
Future Market : Importer will lose INR

( 60-62) *1000= INR 2000 per contract .
The total loss in 1000 contract s will
be INR 20,00,000
Net payments = Rs 63 million -1 million= Net payments = Rs 60 million +2 million=

Rs 62 million
Rs 62 million
94
Currency Option Market
95
Currency Options Market
96
Currency Call Options
97
EXAMPLE : CALL OPTION
98
Market rate
Exercise rate
call @ 63.5
Premium paid
Gain / loss
62.50
.50
-.50
63.00
.50
-.50
63.50
.50
-.50
64.00
.5
.50
64.50
.50
.50
65.00
1.5
.50
1.0
65.50
.50
1.50
When the spot exchange rate rises above the strike price , there are gains when
it falls below the strike price there losses which are maximum to the extent of
premium
99
100
101
102
103
Currency Put Options
104
CURRENCY OPTION STRATEGY FOR EXPORT TRANSACTION
105
Market rate
Exercise rate
Put @ 63.5
Premium paid
Gain / loss
61.50
2.00
.50
1.50
62.00
1.50
.50
1.00
62.50
1.00
.50
.50
63.50
.50
-.50
64.00
.50
-.50
64.50
.50
-.50
When the spot exchange rate fall below the strike price , there are gains when it
rises above the strike price there losses which are maximum to the extent of
premium paid
106
107
108
A CALL OPTION
A trader buys a call option on US dollar with a strike price of Rs.49.50
and pays a premium of Rs.1.50. The current spot rate, St, is Rs.48.50.
His gain/loss at time T when the option expires depends upon the value
of the spot rate, ST, at that time
USD/INR ST AT EXPIRY
48.2500
48.5000
48.7500
49.0000
49.2500
49.5000
49.7500
50.0000
51.0000
52.0000
54.5000
56.0000
Option Buyers Gain(+)/Loss(-)

-Rs.1.50
-Rs.1.50
-Rs.1.50
-Rs.1.50
-Rs.1.50
-Rs.1.50
-Rs.1.25
-Rs.1.00
+Rs.0.00
+Rs.1.00
+Rs.3.50
+Rs.5.00
109
A PUT OPTION
A trader buys a put option on pound sterling at a strike price of
$1.8500, for a premium of $0.07 per sterling. The spot rate at the
time is $1.9465. At expiry, his gains/losses are as follows
GBP/USD ST AT EXPIRY
1.7000
1.7300
1.7500
1.7600
1.7800
1.7900
1.8300
1.8500
1.8700
1.9000
1.9500
Option Buyers Gain(+)/Loss(-)

+$0.0800
+$0.0500
+$0.0300
+$0.0200
$0.0000
-$0.0100
-$0.0500
-$0.0700
-$0.0700
-$0.0700
-$0.0700
110
Elementary Option Strategies
111
112
THANK YOU
113
Thank you
114
115
Cross-Exchange Rate Formulae: Method 1
How many euro's for one pound?

Method 1
S $/ American Terms
S( /) =
S($/ ) American Terms
Notes:
Both are in American terms.
The first currency () goes into the denominator (bottom)
The second currency () goes into the numerator (top)
NOTE: By first currency, I mean the first currency in the spot formula, i.e., X, in S(X/Y).
Method 1: Example
Find S(/)How many yen for a euro?
If S($/) = 1.4497 and S($/) =0.009228
S $/ American Terms
1.4497
S(/ ) =
157.0980
S($/) American Terms 0.009228
Notes:
Both are in American terms.
The first currency () goes into the denominator (bottom)
The second currency () goes into the numerator (top)
Cross-Exchange Rate Formulae : Method 2

How many euro's for one pound?
Method 2
S(/) = S $/ S(/$) American Terms European Term s

$

= S S = S
Notes:

$
= S(/)
One in American terms; one in European terms

The first currency () is in European terms.
The second currency () is in American terms.
The order of multiplication does not matter.
NOTE: By first currency, I mean the first currency in the spot formula, i.e., X, in S(X/Y).
118 (of 24)
Cross-Exchange Rate Formulae : Method 2

Find S(/)How many yen for a euro?
if S($/) = 1.4497 and S($/) =0.009228
S(/) = S $/ S(/$) = 1.4497 108.3650 = 157.0967

Notes:
American Terms European Terms
The first currency is in European terms.

The second currency is in American terms.
The order of multiplication does not matter.
NOTE: When dealing in yen there can be rounding error.
119 (of 24)
Bid-Ask
Cross-Exchange Rates
Using Method 2
Multiply two bids to get a bid.
Multiply two asks to get an ask.
Example:
Sb (/) = Sb $/ Sb (/$)
American Terms European Terms
Sb (/) = 1.4497 108.3650 = 157.0967

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FOREX MARKETS

If the world economy used a single currency

The foreign exchange market is extremely

Exchange Rates /Quotes

A direct quote is a quote where the exchange rate is

Example: Exchange Rates

Suppose you are visiting Bombay and you want

Direct quote is the home currency price of a

Foreign Exchange Markets

Spot Rate of Exchange the price of currency for

American terms & European terms

Example Rs1= $.01449

A direct quote in the United

A direct quote outside

A indirect quote outside the

BID , ASK SPREAD

Bid / Ask Spread

Bid / Ask Spread

Bid / Ask Spread

Example 2 :Cross Exchange Rate

Reading the FX Table

Bid (A/B) = Bid (A/C) X Bid (C/B)

Bid ( /$) X Bid ($/ )

Ask ( /$) X Ask ($/ )

Now let us assume that we want to transact in rupees . In

BID / ASK quotes

BID ( bankers $ buy

BID ( Bankers Rs buy rate)

ASK ( Bankers Rs sell rate)

CROSS RATE : RUPEE / EURO /

CROSS RATE : RUPEE / POUND /

67X $1.53 = Indian direct

CROSS RATE : RUPEE / POUND /

CROSS RATE : RUPEE / YEN /

67X $ .0083 = Indian direct

CROSS RATE : RUPEE / SINGAPORE DOLLAR

Bid $ /S$ = 1/ Ask S$/$ Ask $/S$ = 1/ Bid S$/$

What are Pips in Forex

What are Pips in Forex

Spot and Forward Exchange Rates

A forward contract refers to a transaction for

Consequently, it signs a contract to receive

The company has locked in the current rate

The forward price of a currency need not be equal to

Forward contracts are usually offered by

The maturity date agreed upon by the parties

For example, in India, the USD/INR forward

What determines forward premium?

Forward exchange rates

If we consider continuously compounding

rf = continuously compounded interest

rates for the foreign currency

Lets assume that one year rate interest rate

Suppose that the one year forward rate is less

USD 1000 converted to Rs 62000 and

Suppose , that the spot rate is Rs 60 per USD.

CA FINAL NOV 2009/ May 2010

Three year Expected Forward Rate : 1$USD

1$= Rs 68 to say & 70

1 = Rs 100 to say Rs 90 Customer Rs Appre

where n is the number of days to maturity

Example: Suppose spot rate = $1.401,

$1.398 $1.401 x 360 = 0.86%