Common Contracts
1 similar Forward Contract contracts
ContractForward Contract • May 31st, 2021
A forward contract is an agreement to exchange assets in the future at a predetermined price. It plays a vital role in the Western financial markets and serves as the basic building block for more advanced and sophisticated financial instruments. The primary function of the for- ward market is to provide a vehicle to hedge against unexpected and undesirable price fluctuations. The forward market directly affects the spot market as it also offers arbitrage and speculation opportunities. Forward markets also serve the purpose of “price discovery”—the process of determining the equilibrium prices that reflect current and positive demands for current and prospective supplies, and making these prices visible to all.1
