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 ?
The unilateral nature of the wacd makes it a very useful and flexible tool in structuring shariah compliant FX forward transactions.
The BOK said that the fall in FX turnover came as exporters' sale of FX forward contracts declined amid weak exports affected by the global economic downturn.
FX forward contacts are not permitted to be accounted for as hedges using the shortcut method.
With the liquidity in the currency options market being squeezed, the market may move to become purely offshore, or activity may turn instead to the Fx forward market, we think.
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.
CLS Group (CLS), the global FX financial market infrastructure, and TriOptima, a leading provider of OTC derivatives post-trade risk management services and infrastructure, today announced they will be collaborating to deliver an FX forward compression service to the market.
An FX forward is an agreement to purchase or sell a set amount of a foreign currency at a specified price for settlement at a predetermined future date.
Inflation swap and FX forward compression cycles will be introduced in 2015.
These amendments aim at aligning the treatment of variation margin for physically-settled FX forwards with the supervisory guidance applicable in other key jurisdictions.
Recent additions include the implementation of Order Driven Execution for FX Spot, FX Forwards and CFDs, which provides a safer and more efficient way to fill client orders, and the signing of a partnership with Autochartist to make automated technical analysis tools and live trade signals available across asset classes.
Leveraging SS&Cs Debt and Derivatives accounting technology, Webster seamlessly manages the operational and accounting aspects of OTC derivatives portfolios and provides an ideal valuation and accounting solution for multiple types of swaps, options, and FX forwards.
The OTC FX Futures will be non-standardised amounts and different fixed tenors, but to address current liquidity trouble, the CBN may also offer long-tenored FX Forwards to authorised dealers.