What is covered interest parity (CIP)?

CIP links the FX forward rate to the spot rate and interest rates in two currencies, preventing arbitrage when capital is freely mobile. It prices the forward: F = S × (growth_dom / growth_for).

Which compounding should I use?

Match your inputs to market conventions. Use simple (money-market) for short-dated deposits, annual for quoted APRs, or continuous for theoretical work. The tool supports all three.

Yes. All calculations run in your browser; nothing is uploaded.

Interest Rate Parity Calculator — Covered & Uncovered IRP

Options

Domestic symbol (optional) Shown before numbers for domestic amounts/rates where relevant.

Foreign symbol (optional) Shown before numbers for foreign outputs.

Decimal places Affects formatted outputs (not the internal precision).

Spot quote convention 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, r_d domestic, r_f foreign, and T years.
With growth factors G_d, G_f from your compounding choice:
F = S × (G_d / G_f)

Spot S In the selected quote convention.

Domestic rate r_d (% p.a.)

Foreign rate r_f (% p.a.)

Tenor (days) Or leave blank and use years.

Tenor (years)

Day count (if days used)

Compounding

Market forward F (optional) We’ll report CIP deviation vs. model.

Amount (foreign units, optional) We’ll convert using the model forward.

Label (optional)

Implied Rate — From Spot & Forward

Given S, F, tenor T, and one rate (r_d or r_f) with compounding, solve the other from
F / S = G_d / G_f.

Spot S

Forward F

Tenor (days)

Tenor (years)

Day count (if days used)

Compounding

Solve for

% Known rate Enter r_d if solving r_f, or r_f if solving r_d.

Label (optional)

Uncovered IRP — Expected Spot

A simple UIP view uses the same growth ratio for an expected future spot:
E[S_T] ≈ S × (G_d / G_f)

Spot S

Domestic rate r_d (% p.a.)

Foreign rate r_f (% p.a.)

Tenor (days)

Tenor (years)

Day count (if days used)

Compounding

Label (optional)

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 × (G_d/G_f). 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 = e^rT.

Privacy

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

Interest Rate Parity (IRP) Calculator

Options

Method

Covered IRP — Forward Pricing

Implied Rate — From Spot & Forward

Uncovered IRP — Expected Spot

Results

Interest Rate Parity — Quick Guide

Covered IRP (CIP)

Implied rate

UIP (Uncovered)

Conventions

Privacy

Explore more tools