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.

  1. Security

    A financial instrument that represents an ownership position ...
  2. Basis Point (BPS)

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

    A rate applicable to a financial transaction that will take place ...
  4. Stock

    A type of security that signifies ownership in a corporation ...
  5. Bull Spread

    An option strategy in which maximum profit is attained if the ...
  6. Spot Price

    The current price at which a particular security can be bought ...
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  4. How does a forward contract differ from a call option?

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  5. Why do companies enter into futures contracts?

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