forward rate

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Related to forward rate: Forward exchange rate, Forward rate agreement, Spot rate

Forward rate

A projection of future interest rates calculated from either spot rates or the yield curve. For example, suppose the one-year government bond was yielding 2% and the two-year bond was yielding 4%. The one year forward rate represents the one-year interest rate one year from now. You would solve the formula (1.04)^2=(1.02)(1+F). F is 6.03%.

Forward Rate

The interest rate or exchange rate on a forward contract with a certain expiration. Some analysts believe that forward rates accurately predict future spot rates, though others dispute this.

forward rate

1. The expected yield on a given fixed-income security at a particular time in the future. For example, if the yield on 6-month Treasury bills is expected to be 10.5% in a year, this yield is the forward rate on 6-month bills.

2. The rate at which a particular currency or commodity may be purchased on a forward contract.

Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

References in periodicals archive ?

The fair value of the forward contract is based on the cumulative change in the forward rate (0.0913).

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Not only is the forward rate estimator inefficient, but it predicts the future spot rate in the opposite direction.

Liquidity, information and the size of the forward exchange rate bias

For Q4 2016 expectations, Merrill Lynch expects that the forecast rate might reach EGP 10.50, even while the forward rate is expected to register EGP 11.20.

Egypt's steady adoption of IMF programme would provide upside risk: Merrill Lynch

A less natural, but more useful way to describe the term structure of interest rates is in terms of the instantaneous forward rate, [f.sub.t]([tau]), which is defined by:

Why is Spot Carbon so Cheap and Future Carbon so Dear? The Term Structure of Carbon Prices

Ho and Lee (1986) model the uncertain behavior of the term structure of interest rates through the construction of a binomial tree and, obtain as a result an interest rate structure with a perfect adjustment to the forward rate structure that is used as initial input.

Dynamic estimation of an interest rate structure in Colombia. Empirical analysis using the Kaiman filter/Dinamica de una estructura de tipos de interes en Colombia. Analisis empirico utilizando el filtro de Kaiman

It is noted that interest rate derivatives, such as forward rate agreements, swaps, futures, options, are financial products which are used by banks or companies for managing the risk of interest rate fluctuations.

EU brings forward antitrust charges against Credit Agricole, HSBC and JPMorgan

However, the forward rate for buying euros 11 months later was 1.2387.

Q&A

28 February 2014 -- US-based options and futures exchange operator CME Group Inc's (NASDAQ: CME) London-based CME Clearing Europe European clearing house unit said that it has received Bank of England approval to add overnight index swaps zero coupon swaps forward rate agreements basis swaps variable notional swaps and SEK DKK and NOK currencies for clearing beginning 3 March to its existing interest rate swap offering.

CME Clearing Europe wins B of E nod to add more OTC interest rate swaps

As an annual calculation on its statistics in trading turnover in interbank lending, collateralized repurchase, buyout repurchase, trading of securities in the spot market, asset backed securities, bond lending, bond forwards, interest rate swaps, forward rate agreements, and credit risk mitigation warrant among different members.

E Fund Continues to be Top 100 in Interbank RMB Transaction, Best among Fund Houses

Monday's fall tracked the one-month offshore non-deliverable forward rate, which was being quoted at 65.02 per dollar, compared to the onshore one-month forward rate of 64.88.

Dollar demand hits rupee

In this section the efficiency of the analyzed market is verified by applying the conventional UIP regression approach and orthogonality test of the forward rate forecast error.

Foreign exchange market efficiency. Empirical results for the USD/EUR market

In a scenario of continuously appreciating/depreciating domestic exchange rates, forward contacts failed to mitigate long term exchange risk since the forward rate is a function of continuously appreciating/depreciating domestic spot rate.

ARE currency forwards effective in volatile market conditions? An emerging market perspective