{"categories":["FX"],"contentHtml":"<h3>Week 3 — 10 February 2025</h3><p>The syllabus records this class as “Stochastic Processes — Intro to FX: FX parity; Spot and Forward trading; FX conventions.” The source document does not contain a prose derivation of covered interest parity, so I am keeping the implementation notes and the topic record rather than filling that gap with a generated explanation.</p><h4>Notes on inputs</h4><p>The workbook notes record the conventions used by the later pricing functions:</p><ul><li>Days-to-time conversion uses a 365-day year.</li><li><ol start=\"19\"><li>is the forward FX rate, not spot FX.</li></ol></li><li>Contract types are (C) (call), (P) (put), (F) (forward), (D) (deposit in local currency, usually USD), and (M) (deposit in the foreign currency, usually MXN).</li><li>(DiscRate) is the discounting-currency rate; (ExtRate) is the foreign-currency rate.</li><li>Prices are returned in USD. Notionals are entered in MXN except for a USD deposit ((D)).</li></ul><p>The quote direction and domestic/foreign labels therefore need to be fixed before comparing a spot, forward, or parity calculation.</p><h4>Source boundary</h4><p>The personal course export contains the syllabus and these workbook conventions, but no worked parity example. This article intentionally marks that source boundary instead of presenting an LLM-generated derivation as class notes.</p>","contentSourceFormat":"typst","contentTypst":"== Week 3 --- 10 February 2025\n<week-3-10-february-2025>\nThe syllabus records this class as \"Stochastic Processes --- Intro to FX: FX parity; Spot and Forward trading; FX conventions.\" The source document does not contain a prose derivation of covered interest parity, so I am keeping the implementation notes and the topic record rather than filling that gap with a generated explanation.\n\n=== Notes on inputs\n<notes-on-inputs>\nThe workbook notes record the conventions used by the later pricing functions:\n\n- Days-to-time conversion uses a 365-day year.\n- #block[\n  #set enum(numbering: \"(A)\", start: 19)\n  + is the forward FX rate, not spot FX.\n  ]\n- Contract types are (C) (call), (P) (put), (F) (forward), (D) (deposit in local currency, usually USD), and (M) (deposit in the foreign currency, usually MXN).\n- \\(DiscRate) is the discounting-currency rate; (ExtRate) is the foreign-currency rate.\n- Prices are returned in USD. Notionals are entered in MXN except for a USD deposit ((D)).\n\nThe quote direction and domestic/foreign labels therefore need to be fixed before comparing a spot, forward, or parity calculation.\n\n=== Source boundary\n<source-boundary>\nThe personal course export contains the syllabus and these workbook conventions, but no worked parity example. This article intentionally marks that source boundary instead of presenting an LLM-generated derivation as class notes.","dataUrl":"https://sharifhsn.dev/api/posts/fx-parity-and-forward-trading.json","date":"2025-02-10","datePublished":"2025-02-10","description":"The syllabus records this class as “Stochastic Processes — Intro to FX: FX parity; Spot and Forward trading; FX conventions.” The source document does not contain a prose…","site":"https://sharifhsn.dev","slug":"fx-parity-and-forward-trading","source":"FE-635 | Risk Engineering","sourceUrl":null,"tags":["FX","FX Parity","Forward Contracts"],"title":"FX Parity and Forward Trading","url":"https://sharifhsn.dev/blog/fx-parity-and-forward-trading/","version":"1","wordCount":192}