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? Thanks! wwx
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.
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....