Interest Rate Parity Calculator

Your details

Covered IRP locks in a forward rate using a forward contract. Uncovered IRP relies on expected future spot rates without a contract.
Current exchange rate expressed as domestic currency units per one unit of foreign currency. E.g. 1.10 means 1 foreign unit = 1.10 domestic units.
Annual risk-free interest rate in the domestic (home) country, as a percentage. Use the equivalent government bond or central bank rate.
%
Annual risk-free interest rate in the foreign country, as a percentage.
%
Length of the forward contract or investment horizon.
If you have an actual quoted forward rate from the market, enter it here to check for parity deviations and potential arbitrage. Leave at 0 to skip.
Currency
IRP-Implied Forward Rate
1.116019

The no-arbitrage forward exchange rate consistent with IRP

Forward Premium / Discount1.4563%
Interest Rate Differential1.5%
Arbitrage SignalEnter an observed forward rate to check for arbitrage
Forward Premium/Discount (%)1.4563%
Interest Rate Differential (%)1.5%

IRP forward rate: 1.1160 (domestic per foreign)

  • The Covered IRP (CIRP)-implied forward rate over 1 year is 1.116019.
  • The domestic currency trades at a forward discount (the foreign currency is at a premium) - the annualised forward premium on the foreign currency is 1.4563%.
  • The higher domestic rate (4.5% vs 3%) means IRP predicts the domestic currency will depreciate against the foreign currency over the period.

Next stepTo check for arbitrage, enter the observed market forward rate in the optional field above.

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