Forward Premium Calculator — Forex Forward Premium & Discount
Determine whether a currency is trading at a forward premium or discount relative to the spot rate, and calculate the annualised size of that premium or discount. Useful for FX traders, hedgers, and anyone comparing cross-currency borrowing costs.
days
The base currency is at a premium in the forward market
- 1
Forward − spot
1.118 − 1.1 = 0.018 - 2
Period premium/discount
0.018 ÷ 1.1 × 100 = 1.6364Percentage gain or loss relative to the spot rate over the contract period. - 3
Annualised (360-day basis)
1.6364 × (360 ÷ 90) = 6.5455
How does this calculator work?
Forward Premium (%) = ((Forward Rate − Spot Rate) / Spot Rate) × (360 / Days) × 100. A positive result means the base currency is at a premium (forward > spot); negative means a discount. The annualised figure lets you compare contracts of different maturities.
Formula
How this is calculated
The forward premium or discount measures how much more expensive (or cheaper) a currency is in the forward market relative to the spot market. If the forward rate F is higher than the spot rate S, the base currency is at a forward premium — buyers are willing to pay more for future delivery. If F < S, it is at a discount.
The raw difference (F − S) / S is the period return implied by the rate gap. To make premiums comparable across contracts of different lengths, the formula annualises it by multiplying by 360 ÷ n, where n is the contract length in days (a 360-day convention is standard in most FX markets, though some markets use 365).
According to Covered Interest Rate Parity (CIP), the forward premium should approximately equal the interest-rate differential between the two currencies; deviations indicate arbitrage opportunities or funding frictions. Pips (100ths of a cent, or ×10 000 of the rate) are included because FX desks often quote forward points in pips added to the spot rate.
Frequently asked questions
A currency at a forward premium is more expensive in the forward market than at spot. This usually reflects a lower domestic interest rate relative to the foreign currency — investors require the forward premium to compensate for the lower yield, consistent with Covered Interest Rate Parity.
Forward points are the absolute difference between the forward and spot rate (×10 000 to express as pips). The forward premium is that difference expressed as a percentage per year, making it comparable across currencies and maturities.
The formula uses 360 days, the convention for most currency pairs involving USD, EUR, GBP, and JPY. Some pairs (especially GBP/USD in certain contexts, and some emerging-market currencies) use 365 days — adjust the input days proportionally if your market uses a 365-day convention.
Also known as
TG we-Calculate Editorial Team. (2026). Forward Premium Calculator — Forex Forward Premium & Discount [Online calculator]. TG we-Calculate. https://we-calculate.com/calculator/forward-premium-calculator
TG we-Calculate Editorial Team. "Forward Premium Calculator — Forex Forward Premium & Discount." TG we-Calculate. 2026. https://we-calculate.com/calculator/forward-premium-calculator.
TG we-Calculate Editorial Team, "Forward Premium Calculator — Forex Forward Premium & Discount," TG we-Calculate, 2026. [Online]. Available: https://we-calculate.com/calculator/forward-premium-calculator
@misc{wecalculate_forward_premium_calculator, title = {Forward Premium Calculator — Forex Forward Premium & Discount}, author = {{TG we-Calculate Editorial Team}}, howpublished = {\url{https://we-calculate.com/calculator/forward-premium-calculator}}, year = {2026}, note = {TG we-Calculate} }
Did this calculator help you?