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   Forward Discount
   















 

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Forward Discount

A price relationship in which the forward price, usually a currency exchange rate, is below the spot price. A forward contract will sell at a discount to the spot rate when foreign interest rates are above domestic interest rates. Specifically, the forward exchange rate for a period equals the spot exchange rate multiplied by the ratio of one plus the domestic rate to one plus the foreign rate. See Covered Interest Arbitrage.

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