Forward contract
Also called: forward, forwards
A private agreement to buy or sell something at a price fixed today, for delivery on a future date.
Forwards are negotiated directly between two parties, so each relies on the other to honour the contract. Futures are forwards with standard terms, traded on an exchange and guaranteed by a clearing corporation.
Example
A farmer and a flour mill agree in sowing season on a price for wheat to be delivered after harvest.
Learn more in these lessons
- Forwards and futuresHow do futures work, and how much can you gain or lose?
Related terms
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