forward contract

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Forward contract

A contract that specifies the price and quantity of an asset to be delivered in the future. Forward contracts are not standardized and are not traded on organized exchanges.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Forward Contract

An agreement to buy or sell an asset at a certain date at a certain price. That is, Investor A may make a contract with Farmer B in which A agrees to buy a certain number of bushels of B's corn at $15 per bushel. This contract must be honored whether the price of corn goes to $1 or $100 per bushel. Forward contracts can help reduce volatility in certain markets, but they contain the risks inherent to all speculative investing. These contracts may be sold on the secondary market, but the person holding the contract at its end must take delivery of the underlying asset. Forward contracts are identical to futures contracts except that their provisions are not standardized. That is, forwards may be written with any provisions the parties desire. While this allows for greater flexibility, this makes the contracts less liquid on the secondary market and prevents them from being traded on an exchange.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

forward contract

An agreement between two parties to the sale and purchase of a particular commodity at a specific future time. Although forward contracts are similar to futures, they are not easily transferred or canceled. Thus, they are not liquid.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

Forward contract.

A forward contract is similar to a futures contract in the sense that both types of contracts cover the delivery and payment for a specific commodity at a specific future date at a specific price.

The difference is that a futures contract has fixed terms, such as delivery date and quantity, and it's traded on a regulated futures exchange.

A forward contract is traded over the counter and all details of the contract are negotiated between the counterparties, or partners to the agreement.

The price specified in the forward contract for foreign currency, government securities, or other commodities may be higher or lower than the actual market price at the time of delivery, known as the spot price.

But the participants have locked in a price early specifically so they know what they will receive or pay for the product, eliminating market risk.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.

forward contract

see FUTURES MARKET.
Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005
References in periodicals archive ?
Accounting Standards Update 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, modifies the accounting and reporting of foreign currency forward contract hedges of recognized assets and liabilities denominated in a foreign currency.
Those transactions were in the nature of forward contracts and hence termed as illegal.
The forward contract agreements are over two sites, in Telford and Salford.
This is where utilizing forward contracts becomes a valuable strategy.
At the heart of the NSEL fiasco was a practice at the exchange, where members were allowed to take long term forward contracts in commodities such as oilseeds, cereals and pulses, although the exchange was allowed to handle only spot contracts, similar to mandis where buyers and sellers exchange goods for money.
The holding plans to direct 14 billion tenge of the budget loan to the forward contracts. The financing will be carried out in accordance with the approved limits per Kazakhstani region: Akmola Province - 4.28 billion tenge; Aktobe - 490 million tenge; East Kazakhstan - 490 million tenge; Karaganda - 670 million tenge; Kostanay - 4.24 billion tenge; Pavlodar - 500 million tenge; North Kazakhstan - 3.33 billion tenge.
Implemented by ACDI/VOCA, the project improved the capacity of smallholder producers' associations to provide a large, consistent quantity of process tomatoes (tomatoes grown for processing) to Heinz International and 13 domestic processors who became buyers and signatories to forward contracts with tomato growers.
What happened was something like this: A commodity spot exchange is neither allowed to offer forward contracts nor settle contracts beyond 11 days (T+11).
Also, 40,000 MT of bloom was traded with the price of 16,383 IRR was traded in the form of forward contracts.
is currently reviewing a proposal in the 2013 federal budget that eliminates Character Conversion Transactions - investment strategies that deliver returns in the form of tax-preferred capital gains rather than fully taxable interest income through the use of forward contracts.
Prices of forward contracts of Brent fell 12 cents to USD 112.59 per barrel while the price of forward deals of US crude rose nine cents to USD 99.72 per barrel.