Open forward contract

Risk management - foreign exchange.

An open forward contract is a foreign exchange forward contract that provides flexibility - to the party hedging its foreign exchange risk - over the date at which the currencies are exchanged.

This effectively provides an option 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.

The hedger is obliged to make the exchange within a pre-specified time window.

Open forwards with FX options give flexibility

"Flexibility is super key for me...

It's good to have a product mix that matches a more volatile situation, and that is open forwards with FX options."

Philip Stephens, head of corporate FX dealing at Argentex - The Treasurer 2025 Issue 1 - page 16.

Other names for open forward contracts include open window forwards, optional forward contracts, window forward contracts, time option forwards and option dated forward contracts.

See also

• Bilateral
• Contract
• Deal contingent forward
• Derivative instrument
• Dynamic forward contract
• Fixed forward contract
• Fixing instrument
• Foreign exchange forward contract
• Foreign exchange risk
• Forward
• 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
• Option
• Risk management
• Risk response
• Transfer
• Volatility