Derivatives
Forward Contract
Definition
What is Forward Contract?
A customised over-the-counter agreement to exchange an asset or currency at a future date and agreed price.
Example in practice
How This Looks in Practice
An importer buys dollars forward for payment in three months.
Keep learning
Related Terms
Derivatives
Derivative
A contract whose value depends on an underlying asset, rate, index, or event.
DerivativesUnderlying Asset
The asset, rate, index, or reference on which a derivative's value is based.
DerivativesNotional Amount
The reference amount used to calculate derivative payments, which may exceed the cash initially exchanged.
Derivatives StrategiesCovered Call
A strategy that owns the underlying asset and sells call options against it.