FX Forward Hedging Estimator
Estimate the cost or benefit of hedging a foreign-currency exposure back into GBP with a forward contract, using covered interest rate parity, versus staying unhedged.
Date verificate · iulie 2026
Why is the forward rate different from the spot rate?
The forward rate reflects the interest rate differential between GBP and the foreign currency over the contract term — this is covered interest rate parity, not a forecast of where the spot rate will actually move.
Sursă: Bank of England — official interest rates (bankofengland.co.uk/monetary-policy/the-interest-rate-bank-rate); covered interest rate parity (market-standard forward pricing convention), 2025/26. · actualizat 2026
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Totul despre FX Forward Hedging Estimator
📋Prezentare+
Forward points are derived from the GBP vs foreign money-market interest rate differential over the contract term: a higher GBP rate than the foreign rate produces a forward premium (forward rate above spot); a lower GBP rate produces a forward discount. This is a planning tool for sizing hedge decisions — actual bank forward quotes include a dealer spread and should be used for execution.
💡 Bune practici
- A forward contract locks in a rate now, removing FX risk — but if the currency moves in your favour, you give up the upside too.
- This is a planning estimate; get a dealable quote from your bank or FX broker before executing a real hedge.
- Compare the hedged GBP value against your expected future spot scenario to judge whether hedging is worthwhile for your risk appetite.
🔢 Exemplu concret
€100,000 exposure, spot rate 0.85, GBP rate 5%, foreign rate 3%, 3-month forward: forward rate around 0.8543, valuing the exposure at roughly £85,430 versus £85,000 at spot.
📖Ghid de utilizare+
Cum se folosește acest calculator
- 1
Enter the foreign-currency exposure amount and today's spot rate (GBP per unit of foreign currency).
- 2
Enter the GBP and foreign money-market interest rates, and the forward contract term in months.
- 3
Optionally enter a known forward rate to override the computed one.
- 4
Enter an expected future spot rate to compare the hedged outcome against staying unhedged.
📚Glosar+
- Covered interest rate parity
- The market convention linking spot and forward FX rates to the interest rate differential between two currencies — the basis for pricing forward contracts.
- Forward premium / discount
- The amount by which the forward rate exceeds (premium) or falls below (discount) today's spot rate, driven by the interest rate differential between the two currencies.
ℹ️Surse și actualizări+
Ultima actualizare a datelor
7 iulie 2026
Surse și referințe
Bank of England — official interest rates (bankofengland.co.uk/monetary-policy/the-interest-rate-bank-rate); covered interest rate parity (market-standard forward pricing convention), 2025/26.
Datele acestui calculator sunt actualizate periodic pentru a reflecta ultimele bareme oficiale. În caz de dubiu, consultați sursele oficiale menționate mai sus.
FAQ — FX Forward Hedging Estimator
Why is the forward rate different from the spot rate?+
The forward rate reflects the interest rate differential between GBP and the foreign currency over the contract term — this is covered interest rate parity, not a forecast of where the spot rate will actually move.
Should I always hedge my FX exposure?+
Not necessarily — hedging removes uncertainty but also removes upside if the currency moves in your favour. Compare the hedged value against your expected future spot scenario to decide.