Forward discount

Forward discount

A currency trades at a forward discount when its forward price is lower than its spot price.

Forward Discount

In currency trading, a situation in which the forward price for the currency is less than the spot price. A forward discount occurs when the market expects the currency to depreciate over time. It is important to note, however, that this does not always actually happen.
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References in periodicals archive ?
Engel, Charles (1996) The Forward Discount Anomaly and the Risk Premium: A Survey of Recent Evidence, in Journal of Empirical Finance, vol.
Froot, Kenneth; Frankel, Jeffrey (1989) Forward Discount Bias: Is it an Exchange Risk Premium?
This strategy involves selling currencies forward that are at a forward premium and buying currencies forward that are at a forward discount.
This approach is designed to benefit from the trend that on average currencies that trade at a forward discount tend to perform better than those that trade at a forward premium.
Interest Rate Data Source: CITIBASE data tape Series: 1-month certificate of deposit rate Mexican Interest Rate Data Source: Subdireccion de Investigacion Economica, Indicadores Economicos Series: 1-month certificate of deposit rate Forward Discount Rate Data Source: Data Resources Inc.
Rational Inattention: A Solution to the Forward Discount Puzzle" Discussant: Nelson Mark, University of Notre Dame and NBER
While the forward discount premium puzzle links different financial asset prices, the other great unsolved problem of international finance is "home market bias" in asset stocks.
Rose, "Fixes: Of the Forward Discount Puzzle," forthcoming in Review of Economics and Statistics; and C.

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