THE VALUE OF A FORWARD CONTRACT IN FOREIGN CURRENCIES |
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| Authors: | Ho C. Yang |
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| Affiliation: | The author is Assistant Professor at the School of Business, University of Wisconsin, Eau Claire. He is greatly indebted to the anonymous referee for comments on an earlier version of the paper. |
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| Abstract: | Under some assumptions a valuation model for a forward contract in foreign currencies is developed. The model produces the value of the contract which is consistent with the value of other types of forward contract; the initial value is zero, and subsequent values are the present values of the differences between the forward rate when the contract is written and current forward rates. |
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