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 ?
Importantly, the final determination doesn't extend to other FX derivatives, such as FX options, currency swaps, and nondeliverable forwards.
Since the early 1990s, however, some international banks have been offering an offshore, over-the-counter market in nondeliverable forwards (NDFs) for many emerging-market currencies, including the Chinese renminbi.
Recently, a market in nondeliverable forwards (NDFs) has arisen to provide cover for companies trading in renminbi.