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Inferring EUR Three-Month Forward Rates from FX Parity and OIS Curves

Article Quant Q&A · Author: Олег Бойко
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Summary

The document discusses the Bloomberg EUR implied three-month forward rate and asks how it is derived and which instruments support the underlying curves. The replies explain that the quote is connected to foreign exchange interest rate parity: the FX forward relationship can be used to infer a rate relative to another currency. Bloomberg’s FX forward analysis function is cited as a way to inspect the calculation framework.

One answer says the relevant USD and EUR reference rates use overnight index swap curves, naming three-month OIS instruments for each currency. It also notes that the reported implied rate follows the requested currency’s conventions. These are brief responses to a question, not a full specification of Bloomberg’s methodology; users should verify current instrument choices, conventions, and curve construction in the terminal.

Key ideas

  • An implied FX forward rate is linked to interest rate parity between the currencies.
  • The cited Bloomberg analysis function can help inspect the FX forward calculation framework.
  • The responses identify OIS swaps as inputs for the USD and EUR reference curves.
  • Currency conventions affect the implied rate that Bloomberg reports.
  • The document does not fully specify the vendor’s curve construction or current conventions.

Tags

ForexFixed incomeDerivatives pricing
Full text
# EUR Implied Forward Rate from Bloomberg


# EUR Implied Forward Rate from Bloomberg












does anyone know about the EUR Forward Implied 3 Month Rate published by Bloomberg on the Bloomberg Page EURI3M ?

First question: this is the rate from a forward curved, forward curve being calculated (implied) from some risk-free zero interest curve. Correct? Second question: assuming that first question is correct, what risk-free instruments Bloomberg uses to build the zero interest curve from which forward curve is implied? Possible answers would be LIBORs, Interest Rate Swaps...

## Answer by lady.den (score 1, accepted)

https://quant.stackexchange.com/a/34396

The quote is based on the FX quote to achieve FX parity for your given rates. To understand how it works you can go to {FXFA} which uses the same principle. If you go to help on FXFA you can check the model together with all the calculations.

## Answer by FinanceGuyThatCantCode (score 1)

https://quant.stackexchange.com/a/34384

They use interest rate parity under the assumption that they are backing out the implied rate versus either USD or EUR. For the USD and EUR, they are using the OIS swaps. So for the US, the ticker for the 3M OIS swap is USSOC curncy and for EUR, the 3M OIS swap ticker is EUSWEC curncy. There are many other OIS swap tenors on BBG. I believe BBG will report back the implied rate based on the convention for the currency being requested.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.