Forward Spread

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Basis Point - BPS

    A unit that is equal to 1/100th of 1%, and is used to denote ...
  2. Forward Rate

    A rate applicable to a financial transaction that will take place ...
  3. Bull Spread

    An option strategy in which maximum profit is attained if the ...
  4. Security

    A financial instrument that represents: an ownership position ...
  5. Stock

    A type of security that signifies ownership in a corporation ...
  6. Spot Price

    The current price at which a particular security can be bought ...
Related Articles
  1. Options & Futures

    An Introduction To Gamma-Delta Neutral ...

  2. Options & Futures

    Contango Vs. Normal Backwardation

  3. Options & Futures

    Out-Of-The-Money Put Time Spreads

  4. Options & Futures

    Vertical Bull and Bear Credit Spreads

Hot Definitions
  1. Capitulation

    When investors give up any previous gains in stock price by selling equities in an effort to get out of the market and into ...
  2. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  3. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  4. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  5. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  6. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
Trading Center