NISM Series XIII Common Derivatives Certification Exam Notes
Page 130 Of 303
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Advantages of Forwards:Customizable, perfect hedge, delivery-based settlement.
Limitations of Forwards:Counterparty risk, low liquidity, less transparency.
Interest Rate Parity Formula:F/S = (1+RINR) / (1+RUSD); ensures no arbitrage.
Premium & Discount:Currency with higher interest rate trades at forward discount; lower interest rate at forward premium.
Theoretical Futures Price:F = S × e^(r - rf) × t.
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