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Forward differential

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Definition of Forward differential

Forward Differential Image 1

Forward differential

Annualized percentage difference between spot and forward rates.



Related Terms:

differential cost

a cost that differs in amount among the alternatives being considered


Differential disclosure

The practice of reporting conflicting or markedly different information in official
corporate statements including annual and quarterly reports and the 10-Ks and 10-Qs.


Differential swap

Swap between two LIBO rates of interest, e.g. yen LIBOR for dollar LIBOR. Payments are
in one currency.


Feedforward

The process of determining prospectively whether strategies are likely to achieve the target
results that are consistent with organizational goals.


Forward buying

The purchase of items exceeding the quantity levels indicated
by current manufacturing requirements.



Forward contract

A cash market transaction in which delivery of the commodity is deferred until after the
contract has been made. It is not standardized and is not traded on organized exchanges. Although the
delivery is made in the future, the price is determined at the initial trade date.


forward contract

Agreement to buy or sell an asset in the future at an agreed price.


Forward Differential Image 2

Forward cover

Purchase or sale of forward foreign currency in order to offset a known future cash flow.


Forward delivery

A transaction in which the settlement will occur on a specified date in the future at a price
agreed upon on the trade date.


Forward discount

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


Forward Exchange Market

A market in which foreign exchange can be bought or sold for delivery (and payment) at some specified future date but at a price agreed upon now.


Forward exchange rate

Exchange rate fixed today for exchanging currency at some future date.


Forward Fed funds

Fed funds traded for future delivery.


Forward forward contract

In Eurocurrencies, a contract under which a deposit of fixed maturity is agreed to
at a fixed price for future delivery.


Forward interest rate

Interest rate fixed today on a loan to be made at some future date.


Forward looking multiple

A truncated expression for a P/E ratio that is based on forward (expected)
earnings rather than on trailing earnings.


Forward Differential Image 3

Forward market

A market in which participants agree to trade some commodity, security, or foreign
exchange at a fixed price for future delivery.


Forward premium

A currency trades at a forward premium when its forward price is higher than its spot price.



Forward rate

A projection of future interest rates calculated from either the spot rates or the yield curve.


Forward rate

The future interest rate of a bond inferred from the term
structure, especially from the yield curve of zero-coupon bonds, calculated from
the growth factor of an investment in a zero held until maturity.


Forward rate agreement (FRA)

Agreement to borrow or lend at a specified future date at an interest rate
that is fixed today.


forward rate of exchange

Exchange rate for a forward transaction.


Forward sale

A method for hedging price risk which involves an agreement between a lender and an investor
to sell particular kinds of loans at a specified price and future time.


Forward trade

A transaction in which the settlement will occur on a specified date in the future at a price
agreed upon the trade date.


Interest Rate Differential

The interest rate on our financial assets minus the interest rate on a foreign country's financial assets.


Loss carryforward

The offsetting of a current year loss against the reported taxable
income for future years.


Range forward

A forward exchange rate contract that places upper and lower bounds on the cost of foreign exchange.


Forward Differential Image 4

Tax differential view ( of dividend policy)

The view that shareholders prefer capital gains over dividends,
and hence low payout ratios, because capital gains are effectively taxed at lower rates than dividends.



interest rate parity

Theory that forward premium equals interest rate differential.


Interest rate parity theorem

Interest rate differential between two countries is equal to the difference
between the forward foreign exchange rate and the spot rate.



 

 

 

 

 

 

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