Rollover Debit

AAA

DEFINITION of 'Rollover Debit'

In foreign exchange trading, a loss caused by an unfavorable difference in daily interest rates between the currencies being traded. Essentially, a trader earns interest on the currency that has been loaned out, and pays interest on the currency that has been borrowed. If the interest earned on the loaned currency is lower than the interest paid on the borrowed currency, the trader will have a rollover debit.

INVESTOPEDIA EXPLAINS 'Rollover Debit'

Suppose a trader has borrowed 100,000 euros and loaned U.S. dollars (100,000 EUR/USD). Suppose also that the short term interest rate on euros is 3% and the rate on U.S. dollars is 2%. In this case, our trader is paying interest at 3% per annum on the borrowed euros, and only earning 2% per annum on the loaned U.S. dollars.

RELATED TERMS
  1. Exchange Rate

    The price of a nation’s currency in terms of another currency. ...
  2. Currency Forward

    A binding contract in the foreign exchange market that locks ...
  3. Debit

    An accounting entry that results in either an increase in assets ...
  4. Uncovered Interest Rate Parity ...

    A parity condition stating that the difference in interest rates ...
  5. Transaction Exposure

    The risk, faced by companies involved in international trade, ...
  6. ICE LIBOR

    See LIBOR
RELATED FAQS
  1. No results found.
Related Articles
  1. Forex Education

    Getting Started In Foreign Exchange Futures

    Learn how these futures are used for hedging and speculating, and how they are different from traditional futures.
  2. Forex Education

    Currency Exchange: Floating Rate Vs. Fixed Rate

    Baffled by exchange rates? Wonder why some currencies fluctuate while others are pegged? This article has the answers.
  3. Forex Education

    Forex: Wading Into The Currency Market

    We go over the ground rules and available resources needed for this undertaking.
  4. Forex Education

    Top 7 Questions About Currency Trading Answered

    Whether you're puzzled by pips or curious about carry trades, your queries are answered here.
  5. Forex Education

    The Foreign Exchange Interbank Market

    Can your forex broker offer you the most competitive pricing? Learn how the market's biggest players affect you.
  6. Forex Education

    Trading Forex With Binary Options

    Binary options are an alternative way, with a major advantage, for traders to play the forex market.
  7. Investing

    How To Take Advantage Of A Stronger U.S. Dollar?

    If you are invested in the market, you will feel the effects of a stronger dollar, especially if overseas interests are part of your diversified portfolio
  8. Forex Strategies

    Is Now the Right Time to Invest in the Euro?

    The euro has been falling...does that mean it's now a bargain?
  9. Mutual Funds & ETFs

    Bet Against The Euro With EUO ETF

    Investors who believe that the euro will continue to fall in value can gain short exposure to the euro through the ProShares UltraShort Euro ETF.
  10. Forex

    The Pros and Cons of a Weak Euro

    The lingering Eurozone crisis has caused the euro to decline against the U.S. dollar. Who are the real winners and losers if the ECB adopts Quantitative Easing?

You May Also Like

Hot Definitions
  1. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  2. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  3. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  4. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
  5. Investment Grade

    A rating that indicates that a municipal or corporate bond has a relatively low risk of default. Bond rating firms, such ...
  6. Fringe Benefits

    A collection of various benefits provided by an employer, which are exempt from taxation as long as certain conditions are ...
Trading Center