Spot Rate vs. Forward Rate Calculator: Covered Interest Parity (CIRP)
In global macro finance and foreign exchange (FX) markets. The spot rate represents the current market price for immediate currency delivery (typically T+2 settlement). The forward rate represents the contracted price for currency delivery at a designated future maturity date (e.g., 30, 90, or 360 days).
Covered Interest Rate Parity Formula
Under Covered Interest Rate Parity (CIRP), theoretical forward rates reflect interest rate differentials between two sovereign central banks: Forward = Spot × [ (1 + r_quote × t/360) / (1 + r_base × t/360) ]. Currencies with higher nominal interest rates trade at a forward discount relative to lower-yielding currencies.
Frequently Asked Questions About Spot Rate vs. Forward Rate Calculator
What is the difference between a spot rate and forward rate?
A spot rate is the immediate cash transaction price in the foreign exchange market today, whereas a forward rate locks in the exchange rate for a future execution date.
What are forward points (pips)?
Forward points represent the basis point difference between the forward rate and spot rate: Forward Points = (Forward Rate - Spot Rate) × 10,000.