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 ?
Islamic FX forward based on wacd refers to a unilateral contract involving two parties, where the first party promises with the latter party to buy or sell currency for settlement on a forward value date at the rate and amount agreed today.
Adding FX forwards to our compression catalogue underscores TriOptima s continually expanding role in the OTC derivatives post trade infrastructure, having already 1, said Peter Weibel, CEO of triReduce, TriOptima s compression service.
An average strike forward is an FX forward whose strike is set equal to the average value of the underlying asset on a specific set of dates prior to the payout date.
Last year we passed the $500 trillion mark of notional principal eliminated, and we look forward to growing this achievement with regular compression cycles in the clearinghouses and for uncleared trades; and by adding inflation swaps and FX forwards to the triReduce catalogue.
FX forward transactions currently account for 13% of overall trading in the global FX market, according to the Bank for International Settlements1 with trading volumes rising by 43% between 2010 and 2013.
In addition to Asian FX futures, SGX is the first central counterparty in Asia to clear over-the-counter non-deliverable FX forwards in seven Asian currencies, and interest rate swaps.
This includes Interest Rate Swaps, Credit Default Swaps on single names and baskets, FX Forwards and Equity Options.
The first phase, which began May 1, will cover testing for data submission of primary economic terms, confirmation data and snapshot reporting for FX forwards, swaps and derivatives by firms.
BMO is also: - The first Canadian bank to participate as a marketmaker in China's foreign exchange market starting in 2002 - The first Canadian bank in China to price and trade FX forwards - The first Canadian bank to underwrite a domestic China bond in US Dollars - The first Canadian and first foreign bank to enter into arrangements with EBS in China - Ranked the No.
This includes post-execution transaction processing for FX forwards, non-deliverable forwards (NDFs) and forward rate agreements (FRAs).
It is unfortunate that FX Forwards and FX Swaps are no longer exempted outright as they have been in previous proposals, but we may now be at that juncture where it is as good as it gets for end-users," he says.