Common Contracts
1 similar Forward Contract contracts
PRESENT VALUESForward Contract • February 1st, 2009
The Initial Value of a Forward Contract. One of the parties to a forward contract assumes a long position and agrees to buy the underlying asset at a certain price on a certain specified future date denoted t = τ . The other party assumes a short position and agrees to sell the asset on the same date. The date when the contract is made is t = 0. The agreed settlement price is Kτ = Fτ|0, where Fτ 0 denotes the price at time t = 0 for a delivery of the asset at time t = τ .
