forward exchange rate

ada · February 27th, 2006, 9:49 pm

Hi there,Are there any market conventions on forecasting forward exchange rates? On Bloomberg FRD, only forward exchange rates within 5 years are available, and i have to forecast FX rates for 6 years to 10 years. Already google, but seems little info there. Any hints or thoughts are welcomed here! Thanks!

Icecloud · February 28th, 2006, 3:28 am

You can do bootstrapping of longer dated IRS of the ccy of interest and extrapolate the swap pts from there, then add the pts to the current fx spot rates to get the implied fwds... In general though for longer dated fwds, one looks at cross ccy swaps instead of an outrite forward.

cosmologist · February 28th, 2006, 12:42 pm

is bootstrapping a respectable way to interpolate/ what is the best practice?

johnself11 · March 2nd, 2006, 11:03 pm

not to shrug off your question, but there are a ton of threads on this site which address the issue of yield curve interpotion, if you do a forum search i'm sure you'll get all the info you want