Rollover Debit


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.

  1. Exchange Rate

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  3. Debit

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  4. Uncovered Interest Rate Parity ...

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

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  6. Currency

    Currency is a generally accepted form of money, including coins ...
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