Interest Rate Differential (IRD)
A differential measuring the gap in interest rates between two similar interest-bearing assets. Traders in the foreign exchange market use interest rate differentials when pricing forward exchange rates. Based on the interest rate parity, a trader can create an expectation of the future exchange rate between two currencies and set the premium (or discount) on the current market exchange rate futures contracts. Investopedia Says:
The interest rate differential is a key component of the carry trade. For example, say an investor borrows US$1,000 and converts the funds into British pounds, allowing the investor to purchase a British bond. If the purchased bond yields 7% while the equivalent U.S. bond yields 3%, then the interest rate differential equals 4% (7% - 3%). The interest rate differential is the amount the investor can expect to profit using a carry trade. This profit is ensured only if the exchange rate between dollars and pounds remains constant. Related Terms:
Currency Carry Trade
Exchange Rate
Forex - FX
Forex Futures
Interest Rate Parity
Uncovered Interest Rate Parity - UIP Income In Respect Of A Decedent (IRD)
Money that was due to a decedent and will pass through to the recipient or estate as income during that tax year. The recipient (beneficiary) must declare the money as income in respect of a decedent (IRD) for any year in which income is received. The estate must also claim the income, but may claim a deduction in the amount of income tax due on the IRD. Investopedia Says:
While it's more common to deal with assets in an inheritance, the decedent may have had a last paycheck or unpaid commissions in transit at the time of his or her death. These items will never be reported on the decedent's income taxes and will instead be double-taxed by the recipient and the decedent's estate. Related Terms:
Beneficiary
Death Benefit
Estate Tax
Irrevocable Trust
Taxable Estate |