forward contract

Quick Reference

A contract in which a price is agreed for commodities, securities, or currencies to be delivered at a future date. A forward contract is made with an identified counter-party, and the individual or firm entering into a forward contract remains exposed to the risk that the counter-party may fail to carry out their side of the bargain. Forward contracts may be used for hedging, to decrease risk, or as a speculation, taking on risk for the sake of an expected profit.

Subjects: Economics.

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