# What is the dollar zero rate and the foreign zero rate?

These terms are used in a proof that the forward price of a foreign exchange pair (where the base is USD) at time $t$ is $X_t \cdot e^{(r_s-r_f)(T-t)}$, where $r_s$ is the dollar zero rate and $r_f$ is the foreign zero rate.

• The "zero" refers to "zero-coupon bond". $r_s$ in your case is the continuously compounded risk-free USD interest rate used to value a zero-coupon bond with maturity $T$. – LocalVolatility Jan 5 '18 at 8:46

• As a reminder the price in USD of a ZCB of maturity $(T-t)$ is $P=e^{-r_s (T-t)}$ and similarly for the foreign ZCB. – noob2 Jan 5 '18 at 14:18