Add training workflow, datasets, and runbook

training_data/curated/text/7175b962df2287aada666875e267a6ce2620e3e43a1591807ae6b904d1366f60.txt

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+SPreAD TrADINg IN CUrreNCY FUTUreS
+Of course, the market forces just described would come into play well before the forward/spot 
+ratio increased to 0.82/0.80 = 1.025. The intervention of arbitrageurs will assure the six-month 
+forward/spot ratio would not rise significantly above 1 + r 1/1 + r2 = 1.0099. A similar argument 
+could be used to demonstrate that arbitrage intervention would keep the forward/spot ratio from 
+declining significantly below 1.0099. In short, arbitrage activity will assure that the forward/spot 
+ratio will be approximately defined by the above equation. This relationship is commonly referred to 
+as the interest rate parity theorem.
+Since currency futures must converge with spot exchange rates at expiration, the price spread 
+between a forward futures contract and a nearby expiring contract must reflect the prevailing interest 
+rate ratio (between the eurodollar rate and the given eurocurrency rate).
+4 Hence, a spread between 
+two forward futures contracts can be interpreted as reflecting the market’s expectation for the inter-
+est rate ratio at the time of the nearby contract expiration. Specifically, if P
+1 = price of the more 
+nearby futures expiring at t1 and P2 = price of the forward futures contract expiring at time t 2, then 
+P2/P1 will equal the expected interest rate ratio (expressed as 1+r1/1+r2) for term rates of duration 
+t2 − t1 at time t1. It should be stressed that the forward interest rate ratio implied by spreads in futures 
+will usually differ from the prevailing interest rate ratio.
+If the market expects the eurodollar rate to be greater than the foreign eurocurrency rate, forward 
+futures for that currency will trade at a premium to more nearby futures—the wider the expected 
+differential, the wider the spread. Conversely, if the foreign eurocurrency rate is expected to be 
+greater than the eurodollar rate, forward futures will trade at a discount to nearby futures.
+The above relationships suggest that intracurrency spreads can be used to trade expectations 
+regarding future interest rate differentials between different currencies. If a trader expected eurodol-
+lar rates to gain (move up more or down less) on a foreign eurocurrency rate (relative to the expected 
+interest rate ratio implied by the intracurrency futures spread), this expectation could be expressed 
+as a long forward/short nearby spread in that currency. Conversely, if the trader expected the foreign 
+eurocurrency rate to gain on the eurodollar rate, the implied trade would be a long nearby/short 
+forward intracurrency spread.
+As a technical point, a 1:1 spread ratio would fluctuate even if the implied forward interest rate 
+ratio were unchanged. For example, if P
+2 = $0.81/euro and P1 = $0.80/euro, a 10-percent increase 
+in both rates would result in a 810-point price gain in the forward contract and only a 800-point gain 
+in the nearby contract, even though the implied forward interest rate ratio would be unchanged (since 
+an equal percentage change in each month would leave F/S unchanged). In order for the spread posi-
+tion to be unaffected by equal percentage price changes in both contracts, a development that would 
+not affect the implied forward interest rate ratio, the spread would have to be implemented so that the 
+dollar value of the long and short positions were equal. This parity will be achieved when the contract 
+ratio is equal to the inverse of the price ratio. For example, given the above case of P
+2 = $0.81 and 
+4 All references to interest rate ratios in this section should be understood to mean (1 + r1)/(l + r2) where r1 
+and r2 are the nonannualized rates of return for the time interim between S and F.  Thus, in the above example, 
+the interest rate ratio for the six-month period given annualized rates of 4.04 percent and 2.01 percent is equal 
+to 1.02/1.01 = 1.0099. The reader should be careful not to misconstrue the intended definition of interest rate 
+ratio with a literal interpretation, which in the above example would suggest a figure of 0.02/0.01 = 2.