Forward Margin

DEFINITION of 'Forward Margin'

The difference between the spot rate and the estimated future rate for a certain commodity. The forward margin on foreign currency, for instance, would typically be specified as number of points over or under the spot rate.

BREAKING DOWN 'Forward Margin'

The difference between the two rates can either be a premium or a discount depending if its above or below the spot rate. If you add or subtract the forward margin to the spot rate, you would get the forward rate.

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RELATED FAQS
  1. How do I convert a spot rate to a forward rate?

    Learn how to convert spot rates to forward rates for financial transactions agreed to today but not to be executed until ... Read Answer >>
  2. What is the difference between a forward rate and a spot rate?

    Learn about spot and forward contracts, how spot and forward rates are used for spot and forward contracts, and the difference ... Read Answer >>
  3. What are some securities that have spot rates?

    Learn about the types of assets that have spot rates, and understand how the spot rate is used to determine the fair market ... Read Answer >>
  4. How are commodity spot prices different than futures prices?

    Find out more about commodity spot and futures prices, how to calculate a commodity's futures price, and the differences ... Read Answer >>
  5. What are common factors that affect a security's spot rate?

    Learn the common factors influencing the spot rate for an asset including the bid-ask spread and the forward term structure ... Read Answer >>
  6. How accurate is the forward rate in predicting interest rates?

    Find out why forward rates are inconsistent and limited predictors of actual future interest rates, primarily because the ... Read Answer >>
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