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. Transaction Exposure

    The risk, faced by companies involved in international trade, ...
  5. Uncovered Interest Rate Parity ...

    A parity condition stating that the difference in interest rates ...
  6. ICE LIBOR

    See LIBOR
Related Articles
  1. Getting Started In Foreign Exchange ...
    Forex Education

    Getting Started In Foreign Exchange ...

  2. Currency Exchange: Floating Rate Vs. ...
    Forex Education

    Currency Exchange: Floating Rate Vs. ...

  3. Forex: Wading Into The Currency Market
    Forex Education

    Forex: Wading Into The Currency Market

  4. Top 7 Questions About Currency Trading ...
    Forex Education

    Top 7 Questions About Currency Trading ...

Hot Definitions
  1. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  2. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  3. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  4. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  5. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  6. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
Trading Center