The generalized formula for interest rate parity is given below:
F = S + (S × (R_QC – R_BC) × Period)

. Where

In any currency pair, future value of a currency with high interest rate is at a discount (in relation to spot price) to the currency with low interest rate.

Suppose 6 month interest rate in India is 5% (or 10% per annum) and in USA are 1% (2% per annum). The current USDINR spot rate is 68. What is the likely 6 month USDINR futures price?

Which types of participants have a real exposure to foreign currency risk on account of their underlying business?

Objective of hedgers is to

Which set of market participants does not have a real exposure to foreign currency risk?

Speculator assume FX risk by taking a view on the market direction and hope to make returns by taking the price risk.

Which set of market participants have neither exposure to risk and nor do they take the risk?

Which set of market participants identify mispricing in the market and use it for making profit?

Arbitrageurs lock in a profit by simultaneously entering opposite side transactions in two or more markets.