currency futures - interest rate differentials

Discussion in 'Forex' started by wwx, Mar 11, 2006.

  1. wwx


    Hi all

    When interest rate differentials are used to calculate Globex currency futures prices, what bid and offer interest rates are used? Are any (hidden) spreads (or premiums) ever added to, eg, the offer rate?


  2. cvds16


    it's a theoretical concept to determine prices, only when things get out of line the arbs use the actual cash forex to lay of the risk and invest the one currency while borrowing the other one.
  3. gwac


    There are no hidden fees or spread, but the spot/forward mkt
    at times are not in line with the futures. When this does
    happen, there are brought back in line very quickly, by those
    who arb back and forth between the two markets.

    The differences are usually very small....

  4. wwx


    Thanks for the explanations, gwac and cvds16.