Non-Deliverable Forward


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Non-Deliverable Forward

A forward contract on a low-volume or inconvertible currency that cannot be settled by delivery of the underlying. In a non-deliverable forward, the parties net the difference between the exchange rate listed in the contract and the spot rate, and one party pays the other that difference. They are usually settled in U.S. dollars. Multinational corporations sometimes use non-deliverable forwards to hedge against risk associated with comparatively illiquid currencies.
References in periodicals archive ?
* Non-deliverable forward contracts--the final amount contracted, net of the difference between this amount and the spot price, is recorded as income (expenses) over the effective period of the contract.
Non-deliverable forwards are used to hedge or speculate against currencies when exchange controls make it difficult for foreigners to trade in the spot market directly.
In the offshore non-deliverable forward market, the one-month contract was at 55.10 while the three-month was at 55.63.
In the non-deliverable forward market, where traders place bets on the future exchange rate, the yuan is priced to fall 1.3 percent against the dollar over the next 12 months.
Website, the blockcrypto.com, said that the firm has selected clients to actively trade the derivative, a non-deliverable forward. It is a cash-settled product that is comparable to a futures contract.
Last week, the BSP revived the Currency Rate Risk Protection Program (CRPP), which is the non-deliverable forward facility that allows corporates to manage and lessen its FX risk.
Goldman will start to use its own money to trade with clients in a variety of contracts linked to the price of bitcoin and will also create its own non-deliverable forward to offer to clients.
Most of these trades were done taking advantage of the difference between the forward premium rate in India and the offshore non-deliverable forward market rates, the report said.
With the peso further depreciating to its weakest level since 2005 and hitting a low of P54.66 to the US dollar on Friday, the Bangko Sentral ng Pilipinas (BSP) has decided to re-activate the Currency Rate Risk Protection Program (CRPP) which is the non-deliverable forward (NDF) facility, and allows banks and corporates to lessen their foreign exchange risk.
He added that the bank is working on a derivative known as a 'non-deliverable forward,' following demand from customers.
The one-month onshore forward rate for the rupee was at 64.47 while the offshore non-deliverable forward was at 64.71, an unusually wide gap that reflected bearish overseas bets against the partially convertible currency.
Devaluation expectations of market participants are decreasing, that is evidenced in a steady decline in interest rates on non-deliverable forward contracts used to hedge currency risks.

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