forward exchange contract

Forward Currency Contract

An agreement between two parties to exchange two currencies at a given exchange rate at some point in the future, usually 30, 60, or 90 days hence. A forward currency contract mitigates foreign exchange risk for the parties and is most useful when both parties have operations or some other interest in a country using a given currency. Forward currency contracts are over-the-counter contracts.

Forward Foreign Exchange Rate

The agreed-upon exchange rate for a forward contract on a currency. When a forward contract is made, the parties agree to buy/sell the underlying currency at a certain point in the future at a certain exchange rate. The rate is negotiated directly between the parties, unlike a futures contract, which trades on an exchange. Partly because there is little secondary market for forward contracts, determining the forward foreign exchange rate is a zero-sum game: one party will gain on the contract and one will lose, depending on the movements of the relevant currencies between the formation of the contract and its maturity.

forward exchange contract

a contract to exchange a given amount of one foreign currency for another at a specified future date (usually one or three months ahead). For example, if a UK importer is due to pay $100,000 for materials in three months' time, then in order to guarantee the pound cost of these materials it might cover the transaction by entering into a forward exchange contract to buy $100,000 for delivery in three months' time in return for a given amount of pounds, the amount of pounds being determined by the forward exchange rate. See FORWARD MARKET.
References in periodicals archive ?
Thus, table 2 below depicts the differences and similarities of forward exchange contract and Islamic FX forward which is also known as Promisory forward exchange contract.
Enter into a foreign currency forward exchange contract, designating the transaction as a fair value (asset exposure) hedge.
1 billion yen, reflecting forward exchange contract gains.
Currency Risk -- traditional solutions such as forward foreign exchange and 24-Hour Market Watch, to more innovative solutions such as the bank's new flexible forwards (providing clients with the security of a Forward Exchange Contract and the flexibility of a Currency Option);
5 million gain on a forward exchange contract entered into as a result of the acquisition of Orderman GmbH (second quarter 2008), and a $0.
Most firms grossly overestimate the cost of hedging their foreign exchange exposure; the effective comparison is between today's forward exchange rate and the estimate of the spot exchange rate on the date the forward exchange contract matures, for an extended series of transactions.
received, and the loss on the forward exchange contract was
In May, 2007 the secured forward exchange contract with respect to Gaylord's shares of Viacom, Inc.
3 Adjusted EBITDA for the Hospitality Segment (defined as earnings before interest, taxes, depreciation, amortization, as well as certain unusual items) is used herein because we believe it allows for a more complete analysis of operating performance by presenting an analysis of operations separate from the earnings impact of capital transactions and without certain items that do not impact our ongoing operations such as the effect of the changes in fair value of the Viacom and CBS stock we own and changes in the fair value of the derivative associated with our secured forward exchange contract and gains on the sale of assets.
and the loss on the forward exchange contract was charged to
5 million as a result of entering into a forward exchange contract in preparation for the acquisition of Orderman GmbH.
While these items (other than restructuring, the gain realized on our forward exchange contract and the pre-acquisition charges of potential transactions that will not take place) are recurring and affect GAAP net income, we do not use them to assess our operational performance for any particular period because (a) these items affect multiple periods and are unrelated to business performance in a particular period; (b) we are not able to change these items in any particular period; and (c) these items do not contribute to the operational performance of our business for any particular period.

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