Forward Contracts








What is a forward contract?

A forward contract or simply a forward is a non-evaluated contract between two individuals to buy or sell an asset at a specified next time at a price agreed today. A cash market transaction in which delivery of the commodity is postponed until after the contract has been made. Although the delivery is made in the future, the price is determined on the initial trade date.
A cash market is a transaction in which a seller agrees to deliver a particular cash product to a buyer at some point in the future. Forward contracts are very similar to futures contracts, exclude they are not marked to market, exchange traded, or defined on standardized assets.

The difference between a forward contract and most other sales contracts is that with the forward contract, the delivery and payment of the underlying instrument occurs at a specified future date instead of immediately. A Forward Contract is a way for a buyer or a seller to lock in a purchasing or selling price for an asset, with the transaction set to occur in the future.

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