Long-Term Forward Contract

Long-Term Forward Contract

A non-standardized, over-the-counter agreement in which one party agrees to buy a certain asset from the other at a certain price, at a certain time more than one year in the future. Because there is little secondary market for any forward contract, long-term forward contracts are zero-sum games; one party will win and the other will lose.
References in periodicals archive ?
9 A 50 percent hedge ratio does not take into account that changes in the value of a long-term forward contract will not be realized for many years, however.
They modeled the relationship between prices of long-term forward contracts on fuels (such as oil, coal and natural gas), the price of emission allowances and imported electricity and the long-term price of electricity forwards.
"In response," he said, "the international brewing industry placed long-term forward contracts on the assumption that beer output would continue to rise.
The basic strategy calls for entering into long-term forward contracts for physical delivery with big grain suppliers such as Minneapolis-based Cargill Inc.
Sure, SAA would not have locked in the predictability of exchange rates for as long, but it would have mitigated the potential accounting impact of marking-to-market such long-term forward contracts. Furthermore, over time there's more of an opportunity to change the business' operating strategy to adjust to risks.
Reportedly, the company thought it had hedged its long-term forward contracts to supply American customers with petroleum products at fixed prices by entering into near-term futures contracts to purchase oil.

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