Forward Price

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Related to Forward exchange rates: Forward premium

Forward Price

The agreed upon price of the underlying asset in a forward contract. When a forward contract is made, the parties agree to buy/sell the underlying at a certain point in the future at a certain price. The price 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 price is a zero-sum game: one party will gain on the contract and one will lose.
References in periodicals archive ?
We show it is theoretically possible for the forward exchange rates to be unbiased estimators of future corresponding spot rates for forward market buyers of currency i but not for both sellers and buyers.
IRP, coupled with PPP and the expectations theory of forward exchange rates, implies the international Fisher effect (Emery & Finnerty, 2007).
where [E.sub.t] ([s.sub.t+k]|[[OMEGA].sub.t]) = logarithm of expected spot exchange rate at time t + k, based on information known at time t, [s.sub.t+k] = logarithm of spot exchange rate at time t, [f.sup.(k).sub.t] = logarithm of the k-period forward exchange rate.
Given that both the spot and forward exchange rates are non-stationary variables, a randomly chosen linear combination of these variables, e.g., their difference or realised forecast error, [u.sub.t+1] = [s.sub.t+1] - [f.sub.t], will probably also be non-stationary.
Assuming that the interest rate parity holds, the forward exchange rate will be 97.28 yen/dollar.
The Phillips-Perron [Z.sub.p]-statistics indicated that both logs of the spot and forward exchange rates were unstable but that the expected rate of appreciation and the risk premium were stable series with an AR(1) process for all countries.
The modern approach to forward exchange rate determination suggests that the equilibrium forward exchange rate is determined by the actions of two groups, arbitrageurs and speculators.
In the presence of microstructure frictions, spot and forward exchange rates move against traders as they increase their positions.
Forward exchange rates often reveal the market's best guess about a currency's future path, but no forward renminbi market exists because China restricts such trading.
This is, however, a good description of covered interest parity since forward exchange rates are generally determined by interest rate differentials so profits are arbitraged away.
The overvaluation of sterling is therefore not as acute as it was, and the fall has been [TABULAR DATA OMITTED] considerably sharper than the decline predicted by forward exchange rates. Nevertheless today's exchange rate, of euro 1.42 to the pound, is too high for membership of the currency union.
forward exchange rates [MATHEMATICAL EXPRESSION NOT REPRODUCIBLE IN ASCII]

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