Financial Risk Manager Part 1

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Explanation:

The spot bid-ask spread is 0.015 (= 1.2950 - 1.2800) The six-month forward bid quote is 1.2800 + 0.00406 = 1.28406, and the six-month forward ask quote is 1.2950 + 0.00565 = 1.30065 Thus, the forward bid-ask spread is 1.30065 - 1.28406 = 0.01659

Things to Remember:

Forward points are basis points that are added or subtracted to the spot rate to determine the forward rate for delivery on a specific valuation date.
The points can either be positive or negative, in conjunction with lower or higher interest rates.
A forward point is equivalent to 1/10,000 of a spot rate.
When points are added to the spot rate, this is called a forward premium; when points are subtracted from the spot rate, they constitute a forward discount. In this case, we have forward premiums.

Explanation:

Things to Remember:

Forward points are basis points that are added or subtracted to the spot rate to determine the forward rate for delivery on a specific valuation date.
The points can either be positive or negative, in conjunction with lower or higher interest rates.
A forward point is equivalent to 1/10,000 of a spot rate.
When points are added to the spot rate, this is called a forward premium; when points are subtracted from the spot rate, they constitute a forward discount. In this case, we have forward premiums.

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Q.3818 Assume the USD/CAD spot quote is bid 1.2800 and ask 1.2950. The six-month forward points quote is bid 40.60 and ask 56.50. The forward bid-ask spread is closest to:

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Last updated: July 21, 2026 at 02:10

0.00565

0.30065

0.00406

0.01659