Currency Hedging Calculator

Compare forward contract and option hedging costs using covered interest rate parity. Calculate forward rates, hedge costs, and breakeven exchange rates.

Inputs

Notional Amount (Foreign Ccy)

Spot Exchange Rate

Domestic Interest Rate (%)

Foreign Interest Rate (%)

Hedge Horizon (Months)

Expected Future Spot Rate

Option Premium (%)

Hedge Ratio (%)

Tab to move between fields

Results

Forward Exchange Rate

1.11

Forward Points0.01

Forward Premium/Discount (%)0.99%

Annualized Premium (%)1.97%

Forward Hedge Cost ($)$10,837.44

Option Premium ($)$20,000

Hedged Portfolio Value ($)$1,110,837.44

Hedging Gain/Loss ($)$60,837.44

Breakeven Rate1.11

Cost Savings (Cheaper Method)$9,162.56

Cheaper MethodForward

How to Use This Calculator

Enter Notional Amount (Foreign Ccy), Spot Exchange Rate, and Domestic Interest Rate (%).
Set Foreign Interest Rate (%), Hedge Horizon (Months), and Expected Future Spot Rate.
Adjust Option Premium (%), Hedge Ratio (%) as needed.
Review the Forward Exchange Rate result.
Use Forward Points and Forward Premium/Discount (%) (%) to inform your decision.

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