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.

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.

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.

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.

forward contract

References in periodicals archive ?
Instead, all forward contracts will be cash-settled.
A spot exchange should not offer forward contracts but NSEL was offering T+ 2 and T+ 25 contracts and also T+ 2 and T+ 35 contracts.
The budget proposal applies to any forward contracts with terms exceeding 180 days that are entered into on or after March 21, 2013, or any extension of existing forward contracts on or after March 21, 2013.
A forward contract merchant is defined in Bankruptcy Code Section 101 (26) as an entity whose business consists in whole or in part of entering into forward contracts as or with merchants in a commodity.
In cases where derivative accounting does apply, volatility will arise in profit or loss from remeasuring the contract, unless the remeasurement is matched by an equal and opposite remeasurement of the emission liability (in cases of forward contracts to buy credits) or carbon credit asset (in cases of forward contracts to sell credits).
In addition, the partnership's principal activity must be the buying and selling of options, futures, or forward contracts with respect to commodities (de minimis amount), and at least 90% of its gross income must come from interest, dividends, gains from the sale or disposition of capital assets held for the production of interest or dividends and income, and gains from commodities, futures, forwards, and options, with respect to commodities (IRC section 988[c][1][E][iii]).
The bonds and forward contract sales appear to many to represent a desperate effort to raise capital now that Iran is largely cut off from international markets.
Forward contracts and marketing agreements allow packers and producers to coordinate supply and reduce risk, but, according to Lummis, when they are negotiated in secret, all of the bargaining power is on one side.
The bank, which recently signed a deal with JFE Steel Corporation, has been taking steps to support companies making inroads into emerging markets, such as introducing yuan forward contracts last November.
However, forward contracts have several limitations.
In response," he said, "the international brewing industry placed long-term forward contracts on the assumption that beer output would continue to rise.
Develop a strategy - it may be best to adopt a portfolio approach, using a combination of spot, forward contracts and currency options.