forward rate

Also found in: Dictionary.

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%.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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).
Not only is the forward rate estimator inefficient, but it predicts the future spot rate in the opposite direction.
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.
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.
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.
However, the forward rate for buying euros 11 months later was 1.2387.
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.
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.
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.
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.
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.

Full browser ?