Derivative (finance): Difference between revisions - Wikipedia

Tag: Reverted

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===Forwards===

In finance, a '''forward contract''' or simply a '''forward''' is a non-standardized contract between two parties to buy or to sell an asset at a specified future time at an amount agreed upon today, making it a type of derivative instrument.<ref name="hull">{{cite book|first1=John C. |last1=Hull |title=Options, Futures and another Derivatives |edition=6th |publisher=Prentice Hall |location=New Jersey |year=2006 |isbn=978-0131499089}}</ref><ref>[http://chicagofed.org/webpages/publications/understanding_derivatives/index.cfm "Understanding Derivatives: Markets and Infrastructure"], [[Federal Reserve Bank of Chicago]]</ref> This is in contrast to a [[spot contract]], which is an agreement to buy or sell an asset on its spot date, which may vary depending on the instrument, for example most of the FX contracts have Spot Date two business [https://days-from.today/ days from today]. The party agreeing to buy the underlying asset in the future assumes a [[long position]], and the party agreeing to sell the asset in the future assumes a [[short position]]. The price agreed upon is called the [[delivery price]], which is equal to the [[forward price]] at the time the contract is entered into.

The price of the underlying instrument, in whatever form, is paid before control of the instrument changes. This is one of the many forms of buy/sell orders where the time and date of trade is not the same as the [[value date]] where the [[Security (finance)|securities]] themselves are exchanged.