đ Forward Premium Calculator
Compare spot and forward FX rates to find premium/discount and annualized return.
Period Premium
0.8333%
Annualized Premium
3.3796%
Forward Points (pips)
100.0
How to Use This Calculator
Input the current spot exchange rate, the quoted forward rate for your contract, and the number of days until settlement. The calculator reports the forward premium (or discount) over the period and annualizes it for an applesâtoâapples comparison across different tenors. It also shows forward points (pips), which traders often quote instead of raw forward rates. A positive premium means the base currency is expected to appreciate relative to the quote currency by the settlement date; a negative value signals a discount.
Formula
Premium = (F â S) / S
Annualized Premium â Premium Ă (365 / Days)
About Forward Premium Calculator
Forward premium (or discount) captures how a currencyâs forward price compares to its spot price over a specific horizon. Under interest rate parity, the premium reflects interest rate differentials between the two currencies rather than a guaranteed profit opportunity. Traders use annualized premiums to compare contracts of different maturities and to sanityâcheck quotes against prevailing moneyâmarket rates. This tool keeps the math transparent, showing both the simple period premium and an annualized figure based on a 365âday convention, along with convenient forward points. Use it to translate dealer quotes into intuitive return terms or to verify that a forward line up with spot and rates.
Frequently Asked Questions
Why is the forward at a premium or discount?
Under covered interest rate parity, the forward reflects the interest rate differential between the two currencies. The higherâyielding currency tends to trade at a forward discount, and the lowerâyielding at a premium, after adjusting for compounding and tenor.
Should I use calendar or business days?
For a rough annualization, calendar days are standard. If you need greater precision, use an ACT/360 or ACT/365 convention consistent with the market youâre analyzing.