Currency Forward(redirected from Currency Forwards)
An agreement between two parties to exchange a certain amount in currencies at a certain rate at a certain time. When a forward contract of any sort is made, terms are negotiated directly between the parties, unlike a futures contract, which trades on an exchange. Partly because there is little secondary market for forward contract, determining the forward price is a zero-sum game: one party will gain on the contract and one will lose. Thus, in a currency forward, each party believes that the prevailing exchange rate will move in a direction favorable to him/her by the expiry of the contract.