Agreement cash-settled interbank forward contract on interest rates. The seller pays the buyer the difference between the current rate and the agreed-upon rate if the interest rate has risen above the agreed-upon rate. If the interest rate has fallen below the agreed-upon rate, then the buyer pays the seller.
An exchange rate for delivery on a date later than spot date.
the price determined today for a transaction to take place in the future
a yield on the margin between two successive spot rates
A rate of interest for a specific interval of time starting on a specific date in the future.
Arrangement for a loan to begin at some point in the future with a promise today to receive a specific interest rate or interest rates prevailing today for future loans. The term structure of interest rates is the relation between the current long-term and short-term interest rates, but underlying this is a relationship between the current long-term rate and the rates on current and future short-term loans.
A Forward rate is based on the interest rate differentials. It is a type of contract that allows you to fix an exchange rate today for a date in the future.
Forward rates are quoted in terms of forward points , which represents the difference between the forward and spot rates. In order to obtain the forward rate from the actual exchange rate the forward points are either added or subtracted from the exchange rate. The decision to subtract or add points is determined by the differential between the deposit rates for both currencies concerned in the transaction. The base currency with the higher interest rate is said to be at a discount to the lower interest rate quoted currency in the forward market. Therefor the forward points are subtracted from the spot rate. Similarly, the lower interest rate base currency is said to be at a premium, and the forward points are added to the spot rate to obtain the forward rate.
The price a currency with a maturity beyond the spot date (the price today). Forward rates may be either the same price as a spot rate or different. In the first case, the forward is said to be flat, in the second, it's trading at a premium or discount to the spot rate.
an estimate of what an interest rate will be at a specified future time.
An implicit short-term interest rate at a future point in time. It is derived on the basis of bonds with different, long maturities. The forward rate reflects expectations of the future interest rate, including, inter alia, a risk premium to take account of the uncertainty of the future interest rate.
The rate quoted today for delivery of a specified amount of currency on a specific date/period in the future.
The rate at which a foreign exchange contract is struck today for settlement at a specified future date
The rate at which foreign currency is expected to be worth in the future, usually 30, 60 or 90 days ahead. Traders often buy or sell at forward rates to take advantage of the price spread between spot and forward rates. The practice is called covered interest arbitrage.
A projection of future interest rates calculated from either the spot rates or the yield curve.
A loan agreement that begins at some future point using currently prevailing interest rates for future loans. The rates term structure is the relation between current long-term and short-term interest rates. Underlying this is the relationship between the current long-term rate and both current and future short-term loan rates.
A fixed rate to be applied to a transaction that will come into force at a specific date in the future.
The rate of exchange agreed today for a currency transaction to be settled on an agreed date in the future. The difference between the forward rate and the spot rate is the mathematical result of the difference in interest rates of the two countries concerned.
The amount that a currency, commodity, or some other asset will cost to deliver sometime in the future.
A rate set today for a future foreign exchange deal.
Exchange rate applicable to a transaction, which will occur at a specified point of time in future.