The difference between forward exchange rate and spot exchange rate is expressed by premium, discount and average price. Premium means that the forward exchange rate is higher than the spot exchange rate, while the discount is the opposite. In general, the currency forward exchange rate with higher interest rate is mostly discount, and the currency forward exchange rate with lower interest rate is mostly premium.
In the futures market, if the spot price is lower than the futures price, the basis is negative, and the forward futures price is higher than the recent futures price. This situation is called "futures premium", and the forward futures price exceeds the recent futures price, which is called "futures premium rate".
When the forward futures price is lower than the recent futures price and the spot price is higher than the futures price, the basis is positive, which is called "futures discount", and the part of the forward futures price lower than the recent futures price is called "futures discount".
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Futures market and spot market are just a distinguishing concept in academic research. In practice, they are a whole market. Only when futures pricing and spot logistics play an organic role can the market mechanism operate normally.
There are also near and far month contracts in futures prices. If the price of the far-month futures contract is higher than that of the near-month contract, the far-month futures contract will increase the price of the near-month contract; On the other hand, the distant moon is close to the recent month. From another angle, that is, from recent months to distant months, the same is true.
After understanding this relationship, we can generally look at premium and discount in this way: A is the standard, B is relative, if its value (generally expressed as price) is higher, it is a premium, and vice versa.
For example, the delivery standard of fuel oil specified by Shanghai Futures Exchange is 180CST high-sulfur fuel oil. If the seller's enterprise does not have this standard fuel oil for the time being, it will be replaced with a higher standard imported low-sulfur fuel oil 180, which is a premium compared with the former; If the previous system allows other lower-grade fuels to be transported, it is a discount compared with the standard.
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