Foreign exchange forward contract: Difference between revisions
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imported>Administrator (CSV import) |
imported>Doug Williamson m (Amended wording to line up more closely with US statutory definitions as requested by John Grout in email to Doug Williamson of 17 Nov 2012.) |
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A | A transaction which solely involves the exchange of two different currencies | ||
(i) on a specific future date | |||
(ii) at a fixed foreign exchange rate which is pre-agreed at the outset of the contract. | |||
Foreign exchange forward contracts are used - among other purposes - for hedging forward foreign exchange exposures. | |||
For example known or likely future currency receivables and payables. | For example known or likely future currency receivables and payables. | ||
They are priced by adjusting the spot rate to reflect the interest rate differential between the two currencies involved for the forward period. | They are priced by adjusting the spot foreign exchange rate to reflect the interest rate differential between the two currencies involved for the forward period. | ||
Also known as a Forward foreign exchange contract. | |||
Also known as a Forward foreign exchange contract, or a Foreign exchange forward. | |||
== See also == | == See also == | ||
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* [[Non-deliverable forward]] | * [[Non-deliverable forward]] | ||
* [[Synthetic]] | * [[Synthetic]] | ||
Revision as of 17:21, 19 November 2012
A transaction which solely involves the exchange of two different currencies
(i) on a specific future date (ii) at a fixed foreign exchange rate which is pre-agreed at the outset of the contract.
Foreign exchange forward contracts are used - among other purposes - for hedging forward foreign exchange exposures. For example known or likely future currency receivables and payables.
They are priced by adjusting the spot foreign exchange rate to reflect the interest rate differential between the two currencies involved for the forward period.
Also known as a Forward foreign exchange contract, or a Foreign exchange forward.
