Forward Quote Inputs
Forward Rate Formula
F = S + (Points / Scale)
F = Outright forward |
S = Spot rate |
Points = Forward points
Forward Rate Results
Outright Forward Rate
1.1050
Points in Rate
0.0050
Period Premium
Annualized
Direction
Premium
Covered Interest Parity Check
Enter both interest rates above to see CIP comparison
CIP-Implied Forward
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Difference from Market
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Note: Differences between market forwards and CIP-implied rates can reflect bid/ask spreads, cross-currency basis, day-count conventions, compounding assumptions, or input mismatches. This comparison is a sanity check, not a trading signal.
Formula Breakdown
Forward = Spot + (Points / Scale)
Annualized Premium = Period Premium x (Basis / Days)
Model Assumptions
- Forward points are quoted in dealer convention (pips/points)
- Spot rate is quoted as quote currency per 1 unit of base currency
- Point scale of 10,000 is standard for 4-decimal pairs; use 100 for JPY pairs
- Annualization uses simple interest (not compounding)
- CIP check uses money-market convention: F = S x (1 + rd x t) / (1 + rf x t)
- Results are mechanical conversions, not forecasts or trading recommendations
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Frequently Asked Questions
Forward points (also called swap points) are the difference between the forward exchange rate and the spot exchange rate, quoted as a number that must be divided by the point scale (typically 10,000 for most currency pairs or 100 for JPY pairs) to convert into rate units. Dealers quote forward points rather than outright forward rates because the spot rate changes frequently while the forward points remain relatively stable.
Divide the forward points by the point scale (10,000 for most pairs, 100 for JPY pairs) to get points in rate units, then add this value to the spot rate. For example, if spot EUR/USD is 1.1000 and forward points are 50, the outright forward is 1.1000 + (50/10,000) = 1.1050.
A forward premium exists when the forward rate is higher than the spot rate (positive forward points), indicating the base currency is trading at a premium in the forward market. A forward discount exists when the forward rate is lower than the spot rate (negative forward points). The forward premium/discount typically reflects the interest rate differential between the two currencies.
Most currency pairs are quoted to four decimal places (e.g., EUR/USD 1.1050), where the fourth decimal place is called a pip. Forward points are quoted in pips, so dividing by 10,000 converts pips to rate units. JPY pairs use two decimal places and a point scale of 100 because 1 pip in USD/JPY is the second decimal (e.g., 150.50 to 150.51 is 1 pip).
First calculate the period premium as (Forward - Spot) / Spot x 100. Then annualize by multiplying by (Day-count basis / Days to maturity). For example, a 90-day forward with 0.4545% period premium using a 360-day basis has an annualized premium of 0.4545% x (360/90) = 1.8182%.
Covered interest parity is a no-arbitrage relationship stating that the forward rate should equal the spot rate adjusted for the interest rate differential between two currencies. The formula is F = S x (1 + rd x t) / (1 + rf x t). This calculator provides an optional CIP check to compare the market forward quote against the theoretical CIP-implied forward, though differences can arise from bid/ask spreads, cross-currency basis, and other market factors.
Disclaimer
This calculator is for educational purposes only and performs mechanical conversions of forward points to outright forward rates. Results should not be used for trading decisions. Market conventions, bid/ask spreads, and settlement timing may differ from these simplified calculations. Always verify quotes with your broker or dealer.
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