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 forward contract is recorded, BC amortizes the cost of the forward contract, and recognizes deferred taxes on the difference between the accounting and taxable base in the balance sheet accounts.
Accordingly, a privately negotiated currency forward contract between two parties, neither of which is a bank (in the broadest sense), arguably would not appear to be subject to Sec.
To ensure that the currency rates used to assess the capital budgeting decision remain unchanged, the company could enter into forward contracts at a set rate, timed for the expected delivery date of the equipment.
When the stock has a value of $103, he enters into a forward contract to sell 100 shares for $105 per share in one year.
Forward contracts to repurchase an issuer's equity shares that require physical settlement in exchange for cash are initially measured at the fair value of the shares at inception, adjusted for any consideration or unstated rights or privileges, which is the same as the amount that would be paid under the conditions specified in the contract if settlement occurred immediately.
Purchase and sales contracts are, in fact, forward contracts.
Similarly, in 1989 in establishing the manner of the conduct of the receivership of insured depository institutions under federal law, the Financial Institutions Reform, Recovery and Enforcement Act of 1989 provided for the termination, or closeout, and netting of qualified financial contracts, including securities, commodity and forward contracts, and repurchase and swap agreements.
The transaction reported in today's SEC filing completes a previously disclosed 1999 prepaid forward contract, which was used to finance a portion of the purchase price for the acquisition of the Cleveland Indians by Lawrence Dolan and certain Dolan family trusts.
De Beers Auction Sales today launched forward contract sales to offer customers the opportunity to bid for future supply of the types and quantities of rough diamonds they require, when they require them.
1234A-1) for addressing the character of payments made under an NPC, a forward contract and a type of derivative referred to as a "bullet swap.
As an alternative to a futures contract, one could buy a forward contract.