A forward carries net fair value on balance sheet and its notional off it
Table of Contents
1. Summary
FX forwards are derivatives, so only the net value is recorded, at fair value. The fair value is zero at inception and changes with exchange rates. The notional is the gross face amount and is not the fair value.
2. Detail
The BIS observes that this net treatment hides the full notional exchanged at maturity, which a gross record would show.
3. See also
- FX forwards — the structure note.
- Book and the ledger — completes: the books this reaches.
- A dealer hedges an outright forward with a spot trade and an FX swap — completes: the spot and forward elements.