Hierarchy
SAP_BS_FND (Software Component) SAP Business Suite Foundation⤷
CA-FS-MKD (Application Component) Basic Market Data⤷
/BA1/F4_FX (Package) Market Data: Exchange Rates
Basic Data
| Data Element | /BA1/F4_DTE_FX_FWD_YCTYPE |
| Short Description | Yield Curve Type for Forward Exchange Rates |
Data Type
| Category of Dictionary Type | D | Domain |
| Type of Object Referenced | No Information | |
| Domain / Name of Reference Type | /BA1/F4_RATE_TYPE | |
| Data Type | CHAR | Character String |
| Length | 4 | |
| Decimal Places | 0 | |
| Output Length | 4 | |
| Value Table |
Further Characteristics
| Search Help: Name | ||
| Search Help: Parameters | ||
| Parameter ID | ||
| Default Component name | ||
| Change document | ||
| No Input History | ||
| Basic direction is set to LTR | ||
| No BIDI Filtering |
Field Label
| Length | Field Label | |
| Short | 10 | FW Rate YC |
| Medium | 19 | Forward FX Rate YC |
| Long | 20 | Forward FX Rate YC |
| Heading | 19 | Forward FX Rate YC |
Documentation
Definition
A yield curve type used for calculating forward exchange rates.
Use
If you ask the system to calculate forward exchange rates, the first thing it does is determine the yield curves in both of the currencies involved (on the basis of the yield curve type and the "from" and "to" currencies) so that it can calculate the capital growth in both these currencies up to the future date specified. The system then takes the spot rate and the capital growth information to calculate the forward rate (as shown in the example below).
You can define different yield curve types for an exchange rate category, and thus calculate forward bid rates, forward middle rates, and forward ask rates. To calculate a forward bid rate between currency 1 and currency 2, the system takes the bid yield curve for currency 1 and the ask yield curve for currency 2 to calculate the yield. In order to ensure that the forward ask rate is lower than the forward bid rate, the ask yield curve must have lower rates than the bid yield curve.
Dependencies
The system is only able to calculate forward exchange rates if
- It is also able to calculate the spot rate (in other words, if the exchange rate category has been set up correctly, and if exchange rates exist)
- The appropriate yield curves have been defined in the "from" and "to" currencies, and there is market data for both yield curves
In exchange rate categories where only middle rates are permitted, the system uses only the "Middle" yield curve type. It ignores the "Bid" and "Ask" yield curve types.
Example
Calculating a Forward Exchange Rate
The exchange rate for translating from currency EUR into currency USD is quoted directly as 0.95 and the yield for a term of 1 year is 8% for currency EUR, and 10% for currency USD. If you invest 100 EUR and the translated value of 95 USD for 1 year, you will receive the following:
Capital now Yield Capital in 1 year
100 EUR 8% 108 EUR
95 USD 10% 104.5 USD
Since the original exchange rate is 0.95, this means that 100 EUR is worth the same as 95 USD. Following on from this, the capital values of 108 EUR and 104.5 USD in 1 years time will also be the same, and the forward rate is 104.5 / 108 = 0.96759.
If, however, the forward rate defined today is 1 (and not 0.96759), then an investor today would borrow 95 USD, exchange this for 100 EUR, and at the same time conclude a forward transaction at a forward rate of 1. In 1 years time, then, this investor would have 108 EUR, which he could then exchange back into 108 USD at the agreed rate of 1. Once he had paid back his debts of 104.5 USD, he would still have made a profit of 3.5 USD without employing any capital.
Of course, if the forward rate were less than 0.96759, then the investor could also make a similar profit, only the other way round.
History
| Last changed by/on | SAP | 20110908 |
| SAP Release Created in | 20 |
