Interest Rate Parity (IRP) Calculator

Private & instant. Price FX forwards (CIP), solve implied rates, or estimate expected spot (UIP). No uploads.

Options

Shown before numbers for domestic amounts/rates where relevant.
Shown before numbers for foreign outputs.
Affects formatted outputs (not the internal precision).
We’ll keep the forward in the same convention as the spot.

Method

Tip Use Covered to price a forward from spot + interest rates. Use Implied to back out a rate from spot & a market forward. UIP provides a simple expected spot from rate differentials (theory, not a forecast).

Covered IRP — Forward Pricing

Let S be the spot rate, rd domestic, rf foreign, and T years.
With growth factors Gd, Gf from your compounding choice:
F = S × (Gd / Gf)

In the selected quote convention.
Or leave blank and use years.
We’ll report CIP deviation vs. model.
We’ll convert using the model forward.

Results

Notes: Match your compounding and day-count to quoted rates. CIP is a pricing identity under no-arbitrage assumptions; UIP is an economic hypothesis (not a forecast).

Interest Rate Parity — Quick Guide

Covered IRP (CIP)

Prices the FX forward from spot and interest rates: F = S × (Gd/Gf). If a quoted forward deviates from this, there’s a covered arbitrage opportunity in the model (in practice, frictions and basis can exist).

Implied rate

Given S and F (same quote convention) plus one leg’s rate and tenor/compounding, you can back out the other leg’s implied rate for consistency with CIP.

UIP (Uncovered)

UIP uses rate differentials to form an expected future spot. It is a widely taught hypothesis but often performs poorly for short horizons—treat as illustrative only.

Conventions

  • Quote: Keep S and F in the same convention (D/1F or F/1D).
  • Tenor: Enter days (ACT/360 or ACT/365) or years. If both are present, days take precedence.
  • Compounding: Simple: G = 1 + r·T; Annual: G = (1 + r)T; Continuous: G = erT.

Privacy

All calculations run locally in your browser; nothing leaves your device.

5 Fun Facts about Interest Rate Parity

A 2008 plot twist

CIP held for decades—until the 2008 crisis. Dollar funding stress created a “basis” that made forwards diverge from theory.

CIP gap

Premium vs. points

Positive domestic–foreign rate spreads show up as forward points. Flip the quote convention and that premium becomes a discount.

Quote magic

Small r, big tenor

A tiny 0.25% rate gap barely moves a 1M forward, but can swing a 5Y forward by several percent—time stretches parity effects.

Time amplification

Negative rates flip intuition

When a currency has negative rates, its forward can sit below spot even if it’s “strong”—parity cares about carry, not sentiment.

Carry, not vibe

Forward points ≠ forecast

CIP forward levels are a no-arbitrage price, not a guess of where spot will land. Markets often trade far from that path.

Price vs. view

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