Foreign exchange forward contract

A binding contract to purchase or to sell a specified quantity of a foreign currency at an exchange rate established today for delivery on a specific date in the future.

FX forward contracts are used - among other purposes - for hedging forward FX exposures. 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.

Also known as a Forward foreign exchange contract.

See also

• Hedging
• Non-deliverable forward
• Synthetic