Dynamic forward contract

Risk management - foreign exchange.

A dynamic forward contract is a foreign exchange forward contract that provides additional flexibility to the party hedging its foreign exchange risk.

This effectively provides an option - or options - in favour of the hedger.

The option may be paid for by:

• An up front premium;
• An adverse forward rate in the contract, compared with the current market forward rate; or
• A combination of these.

Corporates act to mitigate FX volatility

Payment fintech Moneycorp suggests a number of ways in which corporates can mitigate the impact of FX exposure...

Make use of forward contracts: Forward contracts, either fixed or dynamic, can be customised to allow companies to lock an exchange rate for a future overseas payment.

Philip Smith, editor, The Treasurer online - 14 October 2022.

See also

• Bilateral
• Contract
• Deal contingent forward
• Derivative instrument
• Fixed forward contract
• Fixing instrument
• Foreign exchange forward contract
• Foreign exchange risk
• Forward contract
• Forward discount
• Forward exchange market
• Forward foreign exchange rate
• Forward margin
• Forward market
• Forward points
• Forward premium
• Forward price
• Forward rate
• Futures contract
• Hedging
• Open forward contract
• Risk management
• Risk response
• Transfer