---
title: Currency forwards
date: "2000-07-03T12:00:00Z"
categories:
  - links
wp_id: 2140
description: I explore why currency forwards are not unbiased estimators of future spot rates but function instead as certainty equivalents. This distinction clarifies risk-adjusted forward pricing and connects financial valuation concepts to the Kelly criterion principles.
keywords: [currency forwards, future spot rate, unbiased estimator, certainty equivalent, kelly criterion, financial derivatives]
---

Prof. [Apte](http://www.iimb.ernet.in/faculty/faculty/Pgapte.htm) mentioned that the [currency forward](http://www.travelexusa.com/prod-contracts.htm) is not an [unbiased estimator](http://mathworld.wolfram.com/UnbiasedEstimator.html) of the future spot rate, but is the certainty equivalent of it. The [Kelly FAQ](http://www.bjmath.com/bjmath/kelly/kellyfaq.htm) gives a good description of what certainty equivalence means.