FX Forward Points, Deposit Rates, and Covered Interest Parity

# Deposit vs. LIBOR rates? (Bloomberg/SuperDerivatives)


# Deposit vs. LIBOR rates? (Bloomberg/SuperDerivatives)












I noticed that Bloomberg and SuperDerivatives both use "Deposit Rates" for the calculation of forward points for currencies.

I couldn't find anything online that describes precisely where these rates come from. Are they just the LIBOR rates in the respective currencies? Since the deposit rates are quoted out past 1 year terms, this can't be entirely correct.

## Answer by Phil H (score 2)

https://quant.stackexchange.com/a/16581

Unless there is something specific happening in those systems, Depo rates should be exactly that. So if you can deposit cash for some rate b or borrow for some rate a, then those rates can be used to calculate the implied forward foreign exchange.

The details of when that is appropriate and at what terms is particular to the currencies involved, so until we know that it is hard to be specific.

## Answer by Randor (score 2)

https://quant.stackexchange.com/a/19501

Boththe base and term depos cannot be equal to libor rates. This is because the forward points and spot are known , so, whatever rate you choose for 1 of the interest rates, the other will be implied from the arbitrage equation fwd=spot x (1 +rT)/(1+qT)

Practice in recent years has been to have the usd int rate come from the 3m libor curve.

## Answer by AKdemy (score 1)

https://quant.stackexchange.com/a/64132

This is very old. However, since 3k looked at this I think a correct answer would still help.

Bloomberg definitely does NOT use depo rates (or any rates) to compute forwards. They are market quoted. The RUB example on OVDV (provided in one of the comments) is only very indirectly related to forwards as the entire function is dedicated to show implied volatilities.

The question is about forwards. These can be found on FRD - for RUB quotations in points are more liquid. Meaning the outright you see is computed from Spot and points. In no way is there any interest rate involved in this. There will be somewhere in the quotes from market makers but that is a completely different story.

FRD: e.g. 1m ticker is RUB1m Curncy. OVDV: the outright corresponds exactly to the FRD value (provided you also use BGN like OVDV and have mid displayed in FRD)

The only time, rates are used is when there are no quotes and covered interest rate parity is used (long dated, or super exotic pairs - but these mostly have no rates either; but you can try jpykrw on FRD - if you have settings - other settings - "calculate missing rates form swap curves" ticked, it will imply them (essentially what FXFM does but with proper basis adjustment on top).

If you stick to options (OVDV and OVML), it is actually one rate that is implied (from spot fwd and the other). This can be seen on OVML - More Market data - where RUB is implied. This is what @Randor answered correctly. You also see what ICVS curve is used for USD (again subject to user choice and market but by default RFR nowadays). That said, there is also a setting for this, and details about calculation can be found here.

## Answer by MattBecker82 (score 0)

https://quant.stackexchange.com/a/19488

Deposits are tradable instruments and the deposit rates on broker screens etc. represent indicative market quotes for these instruments. They can be traded for any maturity in theory but most deposits would be less than a year in maturity.

LIBOR rates, on the other hand are benchmark interest rates for selected maturities, published each working day by a central calculating agent based on the submissions of participating banks' opinions on hypothetical borrowing rates.