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

References in periodicals archive ?
The court found further support for its ruling that the first and second contracts were forward contracts by virtue of the hedging nature of the agreements.
988-5) each might affect the timing of gain or loss on a foreign currency forward contract.
XYZ has no dilutive securities (other than the forward contract associated with the ASR program) and no outstanding preferred stock.
The following example illustrates the accounting for the sale of inventory denominated in euros, uses a 6% annual discount rate, and amortizes the forward contract premium using an effective interest rate method.
CFOs, CPAs and other financial managers can hedge, using new exchange-based electricity derivatives, private forward contracts, or insurance to keep costs even.
The fallback is to bill customers in their local currency and hedge 100 percent of it with a forward contract.
s goal from a tax standpoint would be for the character of any gain or loss on the forward contract to result in ordinary income rather than capital gain or loss.
For the forward contract strategy to be effective, management must assess the volatility of the applicable exchange rate and the expected trends in its movement.
The introduction of forward contract sales will enable customers to engage in forward planning, and help them meet their business requirements.
Similar strategies have been executed with offsetting notional principal contracts, futures contracts, forward contracts and equity swaps on the same or similar securities.
We use a portfolio approach, combining 50 percent forward contracts, 25 percent currency options and 25 percent stop/loss take-profit orders, although we do adjust the formula slightly if we have a strong view on a currency, a larger margin on a particular product or a different competitive situation.