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Adapt currency contract

welcome to currency forward contracts currency forward contract is an agreement between two parties to exchange a fixed amount of one currency for another at an agreed-upon future date the exchange rate for the future transactions is fixed in advance at the time of signing the agreement the currency forward contracts can be either outright forwards or non-deliverable forwards and now try forward contract calls for future transaction where the two currencies are actually exchanged a non deliverable forward contract or NDF is settled in a single currency such as the US dollar both types of forward contracts can be used for speculation or risk management this tutorial discusses outright forward contracts let's consider a US technology company that just delivered an order to a UK customer and is expecting a payment of 10 million British pounds in 90 days let's assume that the current spot rate is dollar 60 per pound so in 90 days the exporter would expect to get 16 million u.s. dollars at the current spot rate however the exporter is concerned that the pound may decline in 90 days in the spot market for example if the spot rate moves to dollar 56 per pound when the payment is received at 90 days the exporter would actually get 15 million six hundred thousand US dollars or four hundred thousand dollars less than originally anticipated to manage the potential risk of four hundred thousand dollars the exporter enters into a forward contract with a bank the bank coats the 90-day forward rate of dollar point one five nine five zero per pound for purchasing pounds and the two parties make the following agreement today at t equals ninety the exporter will deliver to the bank and amount of ten million pounds the back will deliver to the exporter a dollar amount of fifteen million 950,000 here is a timeline to visualize the cash flows the current spot rate is dollar sixteen and the expected receivable amount in 90 days is ten million pounds the 90-day forward rate at t equals zero is one point five nine five zero dollars per pound notice the forward rate is different than the current spot rate and this is very common at t equals ninety the exporter agrees to deliver ten million pounds to the bank also at t equals ninety the bank agrees to deliver fifteen million nine hundred and fifty thousand dollars to the exporter no transaction takes place at the signing of the contract unless fast forward two t equals ninety if everything goes as expected the exporter receives ten million pounds from the UK importer the exporter delivers the amount of the bag for the forward contract the bank delivers the agreed upon amount of fifteen million 950,000 to the exporter let's consider other possible scenarios contrary to the exporters fears the pound could actually appreciated the spot market in ninety days to one point six one dollars per pound this means the exporter has to...