This is the process for ascertaining a FX rate at a future date, applying the FXR spread rates and a target date.  The FXR process allows the user to enter 2 currency codes with  a target date and the calculator will display the extrapolated rate of exchange.  The TRS /FX entry process will allow viewing of extrapolated ROE, FX P&L value and the full workings of extrapolation.

When a company activates TRADE and F&O extrapolation (S01 setting ctrl02_applyextraproe), selective procedures will apply the process e.g. FinCalc, EQUITY.

                                                           

Example for Calculating forward ROE as of 23 DEC 2008 from JPY to USD                                                         

Spot date 20 AUG 2008 is 2 working days forward of 18 AUG 2008

1 months movement of -00.19400000 ends on 20 SEP 2008

2 months movement of -00.39700000 ends on 21 OCT 2008

3 months movement of -00.60100000 ends on 20 NOV 2008

6 months movement of -01.29100000 ends on 20 FEB 2009

1 years   movement of -02.59700000 ends on 20 AUG 2009

2 years   movement of -05.67600000 ends on 20 AUG 2010                                                  

23 DEC 2008 falls between 3 and 6 months movement

No. of days between 20 NOV 2008 and 20 FEB 2009 is 92  (Days in movement)

Days between 20 NOV 2008 and 23 DEC 2008 is 33  (Days between start of movement and maturity date                                                     

Points per day = end movement (-1.291) - Start movement (-0.601) / No. of days in movement (92)

                        = (-1.291 - -0.601) / 92

                        = -0.0075                                                       

Extra movement = Points per day X Days since base

                        = -0.0075 X 33

                        = -0.2475                                                       

ROE    = Spot ROE + Base Movement + Extra Movement

           = 110.305 + -0.601 + -0.2475

           = 109.4565