Forward contract: Difference between revisions
From ACT Wiki
Jump to navigationJump to search
imported>Doug Williamson (Add link.) |
imported>Doug Williamson (Add definition. Source - The Treasurer online - 14 Oct 2022 - https://www.treasurers.org/hub/treasurer-magazine/corporates-act-mitigate-fx-volatility) |
||
| Line 1: | Line 1: | ||
1. ''Risk management.'' | |||
A forward contract is a binding agreement either to buy or to sell a certain amount of a foreign currency or another traded asset at a predetermined price at a specified time in the future. | A forward contract is a binding agreement either to buy or to sell a certain amount of a foreign currency or another traded asset at a predetermined price at a specified time in the future. | ||
| Line 5: | Line 7: | ||
One of the parties is contractually obliged to buy the asset, and the other party is similarly obliged to sell the asset. | One of the parties is contractually obliged to buy the asset, and the other party is similarly obliged to sell the asset. | ||
Sometimes known as a fixed forward contract. | |||
2. ''Risk management.'' | |||
By extension, a more complex risk management contract, including elements of a simple forward contract as described above. | |||
For example, a dynamic forward contract. | |||
| Line 12: | Line 23: | ||
* [[Deal contingent forward]] | * [[Deal contingent forward]] | ||
* [[Derivative instrument]] | * [[Derivative instrument]] | ||
* [[Dynamic forward contract]] | |||
* [[Fixing instrument]] | * [[Fixing instrument]] | ||
* [[Foreign exchange forward contract]] | |||
* [[Foreign exchange risk]] | * [[Foreign exchange risk]] | ||
* [[Forward discount]] | |||
* [[Forward exchange market]] | |||
* [[Forward foreign exchange rate]] | |||
* [[Forward margin]] | |||
* [[Forward market]] | * [[Forward market]] | ||
* [[Forward points]] | * [[Forward points]] | ||
* [[Forward premium]] | |||
* [[Forward price]] | |||
* [[Forward rate]] | |||
* [[Futures contract]] | * [[Futures contract]] | ||
* [[Hedging]] | * [[Hedging]] | ||
Revision as of 20:25, 14 October 2022
1. Risk management.
A forward contract is a binding agreement either to buy or to sell a certain amount of a foreign currency or another traded asset at a predetermined price at a specified time in the future.
Forward contracts are bilateral agreements.
One of the parties is contractually obliged to buy the asset, and the other party is similarly obliged to sell the asset.
Sometimes known as a fixed forward contract.
2. Risk management.
By extension, a more complex risk management contract, including elements of a simple forward contract as described above.
For example, a dynamic forward contract.
See also
- Bilateral
- Contract
- Deal contingent forward
- Derivative instrument
- Dynamic forward contract
- Fixing instrument
- Foreign exchange forward contract
- Foreign exchange risk
- Forward discount
- Forward exchange market
- Forward foreign exchange rate
- Forward margin
- Forward market
- Forward points
- Forward premium
- Forward price
- Forward rate
- Futures contract
- Hedging
- Risk management
- Risk response
- Transfer
