Question
If a currency has the higher risk-free rate, how will it trade in the forward market relative to spot?
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Answer
At a forward discount.
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Question
Why does the short forward have the opposite value of the long forward?
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Answer
Their payoffs are mirror images under the same contract.
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Question
Why is a forward price not generally the market's forecast of the future spot price?
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Answer
It is set by no-arbitrage and carry, not expectations.
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Question
What is the no-arbitrage forward price with no carry effects?
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Answer
F0(T)=S0(1+r)T
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