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.

BREAKING DOWN '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. Funding Currency

    The currency being exchanged in a currency carry trade. A funding ...
  2. Rollover Credit

    Interest paid to a forex trader who holds a position overnight. ...
  3. Interest Cost

    The cumulative sum of the amount of interest paid on a loan by ...
  4. Rollover Rate (Forex)

    The net interest return on a currency position held by a trader. ...
  5. International Currency Exchange ...

    The rate at which two currencies in the market can be exchanged. ...
  6. Direct Consolidation Loan

    A loan that combines two or more federal education loans into ...
Related Articles
  1. Trading

    Understanding Forex Rollover Credits And Debits

    Forex trades are subject to receiving interest or being debited interest if positions are held overnight.
  2. Trading

    How To Borrow For Free

    People will do anything to get a little extra money. If you need some cash, here are some ways you can borrow without much hassle.
  3. Personal Finance

    Simple Interest Loans: Do They Exist?

    Yes, they do. Here is what they are – and how to use them to your advantage.
  4. Trading

    A Primer On The Forex Market

    Moving from equities to currencies requires you to adjust how you interpret quotes, margin, spreads and rollovers.
  5. Small Business

    Lending Clubs: Better Than Banks?

    If you need to borrow money and your credit is making it tough, this new option may be just what you're looking for.
  6. Trading

    The Effects Of Currency Fluctuations On The Economy

    Currency fluctuations are a natural outcome of the floating exchange rate system that is the norm for most major economies. The exchange rate of one currency versus the other is influenced by ...
  7. Personal Finance

    Home Improvement Loans: What Are Your Best Options?

    If you plan on taking out a home improvement loan, you should know what your options are and which ones might be best for your situation.
  8. Trading

    Understanding Currency Carry Trade

    A currency carry trade is a long-term investment strategy used primarily by large institutional investors. The purpose is to make a profit over time from differences in interest rates between ...
  9. Investing

    Explaining Interest

    Interest is the price charged to borrow money, and is typically expressed as a percentage of the principal, or the amount loaned.
RELATED FAQS
  1. How is rollover interest calculated?

    In the forex market, all trades must be settled in two business days. Traders who want to extend their positions without ... Read Answer >>
  2. What does rollover mean in the context of the forex market?

    In the forex (FX) market, rollover is the process of extending the settlement date of an open position. In most currency ... Read Answer >>
  3. Which is better, a fixed or variable rate loan?

    Interest on variable interest rate loans vary as market interest rates change. Interest on fixed interest rate loans will ... Read Answer >>
  4. Are secured personal loans better than unsecured loans?

    Read about the differences between secured loans and unsecured loans and how they are used. Learn about forms of collateral ... Read Answer >>
  5. How are international exchange rates set?

    International currency exchange rates display how much one unit of a currency can be exchanged for another currency. Currency ... Read Answer >>
Hot Definitions
  1. Book Value

    1. The value at which an asset is carried on a balance sheet. To calculate, take the cost of an asset minus the accumulated ...
  2. Dividend Yield

    A financial ratio that shows how much a company pays out in dividends each year relative to its share price.
  3. Fixed-Income Security

    An investment that provides a return in the form of fixed periodic payments and the eventual return of principal at maturity. ...
  4. Free Cash Flow - FCF

    A measure of financial performance calculated as operating cash flow minus capital expenditures. Free cash flow (FCF) represents ...
  5. Leverage Ratio

    Any ratio used to calculate the financial leverage of a company to get an idea of the company's methods of financing or to ...
  6. Two And Twenty

    A type of compensation structure that hedge fund managers typically employ in which part of compensation is performance based. ...
Trading Center