Forward contract

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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