Main focus on the calculation of credit exposures.
- Forward Contracts
- Swaps
- Options
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Forward Contracts:
-Using (interest rate parity) IRP to calculate the implied forward price
F = S (1+ df)^t / (1+ ff)^t
where
dt = domestic risk free rate
ff = foreign risk free rate
t = # of days / 360
-Then compare with the forward rate provided.
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Nice post having a good formula to calculate credit risk, credit risk management and risk management consultants. Thanks for sharing this post.
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