DEFINITION of 'Forward Margin'

The difference between the spot rate and the estimated future rate for a certain commodity. The forward margin on foreign currency, for instance, would typically be specified as number of points over or under the spot rate.

BREAKING DOWN 'Forward Margin'

The difference between the two rates can either be a premium or a discount depending if its above or below the spot rate. If you add or subtract the forward margin to the spot rate, you would get the forward rate.

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RELATED FAQS
  1. How do I convert a spot rate to a forward rate?

    The spot rate shows the cost of executing a financial transaction today, while the forward rate provides the cost of executing ... Read Answer >>
  2. What is the difference between trading currency futures and spot FX?

    The main difference between currency futures and spot FX is when the physical exchange of the currency pair takes place. Read Answer >>
  3. How accurate is the forward rate in predicting interest rates?

    Find out why forward rates are inconsistent and limited predictors of actual future interest rates, primarily because the ... Read Answer >>
  4. Why is the initial value of a forward contract set to zero?

    Discover why the initial value of a forward contract is set to zero; read about financial mathematics and exchange logic ... Read Answer >>
  5. Why do futures' prices converge upon spot prices during the delivery month?

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    There are some distinctions between profit margin and operating margin. They both measure efficiency of a firm but one takes ... Read Answer >>
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