Forward foreign exchange rate(redirected from Forward Foreign Exchange Rates)
Forward foreign exchange rate
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.
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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved