forward contract


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Related to forward contract: hedging, Option contract, Future Contract

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

see FUTURES MARKET.
References in periodicals archive ?
The change in fair value of a foreign currency forward contract designated as a cash flow hedge with hedge effectiveness based on changes in forward rates is currently recognized in other comprehensive income.
Furthermore, notwithstanding that the shareholder had entered into the contract, the Service ruled that it was not a forward contract (as defined in Sec.
Finally, a commodity contract, which is expressly excluded from the definition of a forward contract, is a contract for the future delivery of a commodity that is traded on an exchange.
Under this approach, the effective component of the change in fair value of the forward contract (i.e.
Notwithstanding the growth in use of currency forwards, forward contracts fail to provide protection in situations of sustained long-term appreciation/ depreciation of domestic currency by being short-term in nature.
For those forwards that do result in a constructive sale under IRC Section 1259, unless certain requirements are met for closing out the forward contract, the constructive sale generally will result in immediate recognition of gain by the taxpayer as if the appreciated financial position were sold and repurchased on the date of the deemed sale.
. Develop a strategy - it may be best to adopt a portfolio approach, using a combination of spot, forward contracts and currency options.
Gulf News: Tell us a bit about forward contracts from First Rate FX.
These are forward contracts, and they constitute a basic form of energy risk-management, based on derivatives.
such that the character of the income and losses from a forward contract
The airline's troubles began when its treasury group executed a simple and widely accepted hedging strategy of locking in future long-term currency exposures with forward contracts (purchase U.S.
It may be too soon to commit to a future or forward contract but the company can proactively buy some currency insurance in effect through options.