Last Updated on 2023-12-11 by Admin
A forward contract is an agreement to buy or sell an asset at a predetermined future time for a predetermined price.
A forward contract is traded in an Over-The-Counter market (OTC) between two financial institutions or between a financial institution and one of its clients. Further a forward contract is legally binding on both parties.
The party in the forward contract which agrees to buy the asset is said to have the long position and the party which agrees to sell the asset is said to have the short position.
Forward contracts on foreign exchange is a popular way of hedging against foreign currency exposure.
