Forward Spread

DEFINITION of 'Forward Spread'

The price difference between the spot price of a security and the forward price of the same security taken at a specified interval. The forward spread is usually calculated using the forward price one month after the spot price. An at par forward spread is found when the spot price and the forward price are the same.

BREAKING DOWN 'Forward Spread'

For example: The spot price of the security is 1.02. The forward price, taken one month later, is 1.07. Therefore, the forward spread is 0.05, or 5 basis points.

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RELATED FAQS
  1. How is a share premium account taxed?

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  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. How do I convert a spot rate to a forward rate?

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  4. Why is the initial value of a forward contract set to zero?

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  5. What are common factors that affect a security's spot rate?

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