Using a no-arbitrage argument derive an expression for the k-period forward price in domestic currency of one unit of foreign currency. Denote that Fk is the k-period forward price, S the current spot price of the foreign currency, r is the one-period risk free domestic interest rate and rf is the one-period foreign interest rate.

(8 marks)

Answer rating: 100% (QA)

To derive the expression for the kperiod forward price in the domestic currency of one unit of foreign currency using a noarbitrage argument we can st... View the full answer