3.14 Valuing a Forward contract Pages 59, 60) Suppose that K is delivery price in a forward contract Fo is forward price that would apply to the contract today The value of a long forward contract, f, is (Fo-Ke-rt Similarly the value of a short forward contract 0 e Options, Futures, and Other Derivatives, 4th edition@ 2000 by John C. Hull Tang Yincai, C 2003, Shanghai Normal University3.14 Options, Futures, and Other Derivatives, 4th edition © 2000 by John C. Hull Tang Yincai, © 2003, Shanghai Normal University Valuing a Forward Contract (Pages 59,60) • Suppose that K is delivery price in a forward contract & F0 is forward price that would apply to the contract today • The value of a long forward contract, ƒ, is ƒ = (F0 – K )e–rT • Similarly, the value of a short forward contract is (K – F0 )e–rT