Discount refers to the phenomenon that the quoted currency interest rate is higher than the quoted currency interest rate, and premium refers to the situation that the quoted currency interest rate is lower than the quoted currency interest rate.

Give an example of discount:

If the price of GBP/USD is 1.5030/40. The exchange points are arranged in a way of large left and small right. The two-way interest rates for overnight borrowing of sterling are: 4.00% (deposit) and -4.25% (loan) respectively. The two-way interest rate of overnight dollar borrowing is: 2.25% (deposit) and -2.50% (loan). rule

1, buy GBP/USD. The exchange points calculated in the above example are-0.63;

2. The calculation method of selling GBP/USD is as follows:

1.5030× (2.25%-4.25% )×1day /360 days =-0.000083.

That is, the exchange point is -0.83.

Therefore, the overnight exchange point of GBP/USD is 0.83/0.63 basis points.

This is the professional usage of discount in the market.

Examples of premium are:

If the price of USD/CHF is 1.66 10/20 (the order of exchange rate points is small on the left and big on the right). The three-month two-way US dollar interest rates are 2.25% and -2.50% respectively. The two-way interest rates of three-month Swiss francs are 4.75% and -5.00% respectively. rule

1. When selling dollars and buying Swiss francs, the overnight exchange point is calculated as follows:

1.6610× (3.75%-2.5% )×1day /360 days.

That is 0.58 basic points (pip).

2. When buying dollars and selling Swiss francs, the overnight exchange point is calculated as follows:

1.6620× (5.00%-2.25% )×1day /360 days =0.000 127.

That is 1.27 basic points (pip).

Therefore, the overnight exchange point of USD/CHF is 0.58/ 1.27 pips.

For personal speculation, you may be more concerned about the premium in spot foreign exchange transactions. Generally speaking, foreign exchange transactions in the international foreign exchange market are regarded as spot transactions unless a date is specified. At present, it is in the real-time quotation system of REUTERS and Moneyline (SeeWaa) in China. The foreign exchange rate it quoted is the spot exchange rate. If the delivery date of the buyer and seller is not the spot date, the exchange rate must be adjusted to reflect the interest rate difference between the two currencies, so the exchange rate on a specific date will be different from the spot exchange rate.

There are two ways to quote money: direct quotation and indirect quotation. Direct quotation method, also known as price quotation method, refers to the measurement of a unit's foreign currency in domestic currency; Indirect quotation method, also known as quantity quotation method, refers to how much foreign currency a unit of domestic currency is converted into.

The "exchange point" comes from the "interest rate level difference" between the two trading currencies. This difference can be expressed in the form of exchange rate, which is the exchange point between two currencies in a certain period of time.