Immanuel Edunsin
28 lines
1.2 KiB
Python
28 lines
1.2 KiB
Python
def theoretical_forward(spot: float, r_dom: float, r_for: float, tenor_days: int) -> float:
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"""
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Calculate the theoretical forward rate:
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F = S * (1 + r_dom * (tenor_days/360)) / (1 + r_for * (tenor_days/360))
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"""
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return spot * (1 + r_dom * tenor_days / 360) / (1 + r_for * tenor_days / 360)
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def deviation_bps(obs_fwd: float, theo_fwd: float) -> float:
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"""
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Compute the deviation between observed and theoretical forward,
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expressed in basis points.
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"""
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return (obs_fwd - theo_fwd) / theo_fwd * 10_000
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if __name__ == "__main__":
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# Example inputs (replace these with your real data)
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spot_rate = 1.16910 # from PricingInfo closeout or mid
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observed_fwd = 1.16930 # placeholder forward outright
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r_domestic = 0.025 # e.g., 2.5% annual domestic interest
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r_foreign = 0.005 # e.g., 0.5% annual foreign interest
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tenor_in_days = 30 # for 1M tenor, approx 30 days
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theo = theoretical_forward(spot_rate, r_domestic, r_foreign, tenor_in_days)
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dev = deviation_bps(observed_fwd, theo)
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print(f"Theoretical 1M Forward: {theo:.6f}")
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print(f"Deviation: {dev:.2f} bps")
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