Module 11.2, LOS 11.d: Mark to Market Value of Forward Contract

The mark to market value is the difference between the locked in value of a forward contract and the current market value of the contract, discounted for the time remain in the contract.


Vt = value of the forward contract at time t (to the party buying the base currency), (t < T) denominated in price currency

FPt = forward price (to sell base currency) at time t in the market for a new contract maturing at time T

FP = forward price specified in the contract at inception (to buy the base currency)

days = number of days remaining to maturity of the forward contract (T − t)

R = interest rate of price (denominator) currency

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