Forward Discount

AAA

DEFINITION of 'Forward Discount'

In a foreign exchange situation where the domestic current spot exchange rate is trading at a higher level then the current domestic futures spot rate for a maturity period. A forward discount is an indication by the market that the current domestic exchange rate is going to depreciate in value against another currency.

INVESTOPEDIA EXPLAINS 'Forward Discount'

A forward discount means the market expects the domestic currency to depreciate against another currency, but that is not to say that will happen. Although the forward expectation's theory of exchange rates states this is the case, the theory does not always hold.

RELATED TERMS
  1. Currency Forward

    A binding contract in the foreign exchange market that locks ...
  2. Currency

    A generally accepted form of money, including coins and paper ...
  3. Currency Futures

    A transferable futures contract that specifies the price at which ...
  4. Forex - FX

    The market in which currencies are traded. The forex market is ...
  5. Currency Pair

    The quotation and pricing structure of the currencies traded ...
  6. Spot Exchange Rate

    The rate of a foreign-exchange contract for immediate delivery. ...
Related Articles
  1. A Primer On The Forex Market
    Options & Futures

    A Primer On The Forex Market

  2. What is the difference between forward ...
    Investing

    What is the difference between forward ...

  3. The Money Market
    Retirement

    The Money Market

  4. Forex Tutorial: The Forex Market
    Forex Education

    Forex Tutorial: The Forex Market

comments powered by Disqus
Hot Definitions
  1. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  2. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  3. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  4. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  5. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  6. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
Trading Center