Present Value of a Forward or Futures Contract (FRM)

Present value of a forward contract can be calculated as
follows ; 1 st we must calculate the value of the forward contract (F)
then we should simply take the difference between the
contract price (K) (this is part of the contract) and the price of the forward contract and discount it based on the risk free interest rate in order to
calculate the present value of the forward contract.

Its important to note that the contract price of the forward
contract (K) will not change but the price (F) of the forward contract
will keep changing on a daily basis till maturity.

This is part of the FRM Part 1 syllabus. For more information on FRM please visit www.wallstreetready.com

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