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Forward Markets and Instruments
- Forward Market means the informal market through which forward contracts are traded.
- Forward contracts include commodity forwards, equity forwards, interest rate forwards, forward contracts on individual stocks etc.
- Interest rate forward contract or forward rate agreement is a contract wherein the underlying instrument is interest payment made in dollars, eurodollar or any other currency at an appropriate rate of that currency.
- Value of forward contract at initiation, inspiration and during its life can be determined. For example, the value of a forward contract at initiation is zero.
- Forward contracts are used by companies in order to hedge their transaction exposure.
- Speculation is another forward contract strategy which involves contemplation of the future, formulation of expectations and taking positions to gain profits.
- Forward Market means the informal market through which forward contracts are traded.