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- Forex Forward Contract
Forex Forward Contract
Forex Forward Contract Meaning:
In foreign exchange terminology, a Forex Forward Contract refers to a foreign exchange transaction done for a value date other than spot. Sometimes also called forward outrights, forex forward contracts generally involve buying or selling one currency and simultaneously selling or buying another, with each currency scheduled for delivery on the same value date. They will often be dealt by first dealing value spot, and then performing a currency swap to roll the position out to the desired value date.
Forex Forward Contract Example:
Forex Forward Contracts will often be used by corporations looking to protect or hedge a known currency exposure due to occur in a certain amount on a specific date. Such contracts generally trade in the over-the-counter forex market, so they can be transacted in customized amounts and value dates out to 10 years. Nevertheless, certain standard value dates provide greater liquidity in the short-term interbank forward market. These include: 1 month, 2 months, 3 months, 6 months, 9 months and 1 year delivery dates.