Online Tool Store
Currency Hedging Cost Estimator
Currency Hedging Cost Estimator gives the theoretical cost; the dealer spread on top is the number to negotiate. Runs entirely in your browser with no upload.
🔒 This tool runs entirely in your browser. Your files are never uploaded to a server.
Finance
Currency Hedging Cost Estimator
Frontend preview — no upload or external service.
Hedging cost
A 2.5 point rate differential over 6 months implies roughly 1.25% in forward points — about 6,250 on a 500,000 exposure, before any bank spread.
How the Currency Hedging Cost Estimator works
- Enter the exposure and the two currencies' interest rates for the tenor you need.
- Read the forward points, which follow from the rate differential rather than from any forecast.
- Add the bank's spread, which is quoted separately and is often a meaningful share of the total on smaller amounts.
The method
Covered interest rate parity sets the forward rate from the interest rate differential, not from an expectation of where spot will go.
forward = spot x (1 + r_quote x t) / (1 + r_base x t)
Hedging into a higher-rate currency costs; hedging into a lower-rate one earns. Neither is a view on the currency.
FAQ
Why does hedging cost anything?
Because of the interest rate differential, not because of a forecast. Forward rates are set so that borrowing in one currency and lending in the other produces no free profit — the cost is arithmetic.
Can hedging earn money?
The forward points can be positive when you hedge into a lower-yielding currency. That is not a gain from the hedge; it is the mirror of the rate differential and it comes with the corresponding funding position.
Does this include the bank's margin?
No. Forward points are the theoretical cost. Dealers add a spread that varies with size, tenor and relationship, and on a small exposure it can exceed the points themselves.
How we compare
| Feature | Online Tool Store | A spreadsheet | An advisor consultation |
|---|---|---|---|
| Shows the parity calculation | ✓ | ✗ | ✓ |
| Annualised cost | ✓ | ✓ | ✓ |
| No account needed | ✓ | ✗ | ✗ |
| Nothing uploaded | ✓ | ✗ | ✗ |
Currency Hedging Cost Estimator gives the theoretical cost; the dealer spread on top is the number to negotiate.