What are forward points and how are they quoted?

Forward points (swap points) are the difference between the forward rate and spot rate, quoted in pips (0.0001 for most pairs). Positive points indicate the forward currency trades at a premium to spot (its interest rates are lower); negative points indicate a discount. Banks quote bid/ask forward points separately from spot.

What is an FX swap versus an outright forward?

An FX swap involves a simultaneous spot buy and forward sell (or vice versa), used for short-term funding and rollover. An outright forward is a single transaction to buy/sell at a fixed rate on a future date, used for hedging known cash flows. FX swap pricing embeds covered interest parity via the forward points.

FX Forward Outright Rate Calculation

Calculate the FX forward outright rate from the spot rate and forward points (pips) quoted in the interbank market, converting swap points to forward rates for hedging and pricing purposes.

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Frequently Asked Questions

What are forward points and how are they quoted?

What is an FX swap versus an outright forward?