The Interest Rate Differential (IRD) is used to measure the difference in interest rates between two similar assets. IRD is most often used in finance and investing markets to determine the value of an asset using the difference between two similar investments. In fixed-income, forex, and lending markets IRD can be used to calculate a currency carry trade.Interest rate differential (IRD) is the difference between two interest rates. It usually applies to fixed income securities and carries a large impact on IRD calculators. It is also used in forex trading and lending markets.An interest rate differential (IRD) is a metric that measures the spread between rates on two similar securities. There are two basic ways an IRD will be calculated in equity, bond, forex and lending markets. In equities and fixed income, IRD is often used as one of the metrics that would form the basis for choosing a security to invest in. It is important to note the type of IRD discussed above differs from a term structure or implied volatility calculation.The interest rate differential (IRD) is an important tool for analyzing how two assets will compare when analyzed on a comparable basis and is most often used when comparing investments with similar risk profiles. The term "interest rate differential" was popularized by the economist Harry Markowitz in his theory of portfolio diversification where he showed that a different choice of beta weights could generate similar returns despite differences in risk levels.
