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The price that the buyer and seller agree on.
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Ask us of the following best explains what a forward contract is?
A forward contract is the simplest of the Derivative products. It is a mutual agreement between two parties, in which the buyer agrees to buy a quantity of an asset at a specific price from the seller at a future date. The Price of the contract does not change before delivery. These type of contracts are binding, which means both the buyer and seller must stay committed to the contract. This means they are bound to deliver or take delivery of the product on which the forward contract was agreed upon. Forwards contracts are very useful in hedging
What are forward contracts in shares?
A forward contract is the simplest of the Derivative products. It is a mutual agreement between two parties, in which the buyer agrees to buy a quantity of an asset at a specific price from the seller at a future date. The Price of the contract does not change before delivery. These type of contracts are binding, which means both the buyer and seller must stay committed to the contract. This means they are bound to deliver or take delivery of the product on which the forward contract was agreed upon. Forwards contracts are very useful in hedging
What is future and forward contract?
Forwards Contract: A forward contract is the simplest of the Derivative products. It is a mutual agreement between two parties, in which the buyer agrees to buy a quantity of an asset at a specific price from the seller at a future date. The Price of the contract does not change before delivery. These type of contracts are binding, which means both the buyer and seller must stay committed to the contract. This means they are bound to deliver or take delivery of the product on which the forward contract was agreed upon. Forwards contracts are very useful in hedging Futures Contract: A futures contract is an agreement to buy or sell an asset at a certain time in the future at a specific price. The Contractual terms of the futures contracts are very clear. The Futures market was designed to solve the shortcomings in the forwards contracts. Unlike forwards, futures are traded in organized exchanges. They also use a clearing house that provides the necessary protection to both the buyer and the seller. The price of the futures contract can change prior to delivery. Hence, both participants must settle daily price changes as per the contract values. Difference: Futures are traded in Organized Exchanges while Forwards are Over-The-Counter (OTC) traded
What are the similarities between a forward contract and afutures contract?
Forwards Contract: A forward contract is the simplest of the Derivative products. It is a mutual agreement between two parties, in which the buyer agrees to buy a quantity of an asset at a specific price from the seller at a future date. The Price of the contract does not change before delivery. These type of contracts are binding, which means both the buyer and seller must stay committed to the contract. This means they are bound to deliver or take delivery of the product on which the forward contract was agreed upon. Forwards contracts are very useful in hedging Futures Contract: A futures contract is an agreement to buy or sell an asset at a certain time in the future at a specific price. The Contractual terms of the futures contracts are very clear. The Futures market was designed to solve the shortcomings in the forwards contracts. Unlike forwards, futures are traded in organized exchanges. They also use a clearing house that provides the necessary protection to both the buyer and the seller. The price of the futures contract can change prior to delivery. Hence, both participants must settle daily price changes as per the contract values. Difference: Futures are traded in Organized Exchanges while Forwards are Over-The-Counter (OTC) traded
What is the difference between a forward contract and a cash transaction?
In a forward contract, you are setting the price now for something you'll buy later. A cash transaction involves setting the price for something you're buying today.
Explain the difference between forward contracts and futures contracts?
Forwards Contract: A forward contract is the simplest of the Derivative products. It is a mutual agreement between two parties, in which the buyer agrees to buy a quantity of an asset at a specific price from the seller at a future date. The Price of the contract does not change before delivery. These type of contracts are binding, which means both the buyer and seller must stay committed to the contract. This means they are bound to deliver or take delivery of the product on which the forward contract was agreed upon. Forwards contracts are very useful in hedging Futures Contract: A futures contract is an agreement to buy or sell an asset at a certain time in the future at a specific price. The Contractual terms of the futures contracts are very clear. The Futures market was designed to solve the shortcomings in the forwards contracts. Unlike forwards, futures are traded in organized exchanges. They also use a clearing house that provides the necessary protection to both the buyer and the seller. The price of the futures contract can change prior to delivery. Hence, both participants must settle daily price changes as per the contract values. Difference: Futures are traded in Organized Exchanges while Forwards are Over-The-Counter (OTC) traded
What is spot delivery contract and forward delivery contract?
A spot delivery contract really isn't much of a contract. You're a baker who needs sugar--you buy futures contracts but you've been hit with a huge order for cookies and you don't have enough sugar on hand to deal with the problem. Normally you'll have a line of credit established with a sugar company for just such occurrences. To make a spot contract, you call the sugar company and ask them to bring you a truckload of sugar. It shows up, you get the bill at the end of the month, all is well. That's a spot contract. A forward delivery contract is for the sugar farmer. You have 500 acres of sugar beets. You have no idea of the exact tonnage of beets you are going to harvest or the exact date the harvest will be. To help manage your risk, you make a contract with a sugar refinery to sell them your whole crop when it is harvested for a specified price per ton.
What is forward rate in foreign exchange market?
Transaction in future date by forward contract(future delivery) to purchase/sell foreign exchange at prevailing rate.
Conditions under which forward and futures prices would be equal?
Different price of futures and forward which are identical (similar underlying assets) is because of the daily settlement on the futures contract. the price for both contract will be the same before the daily settlement.
What is a Forex spot contract?
A spot contract, spot transaction, or simply spot, is a contract of buying or selling a commodity, security or currency for settlement (payment and delivery) on the spot date, which is normally two business days after the trade date. A spot contract is in contrast with a forward contract or futures contract where contract terms are agreed now but delivery and payment will occur at a future date.
What is a forward contract?
A customized contract between two parties to buy or sell an asset at a specified price on a future date. A forward contract can be used for hedging or speculation, although its non-standardized nature makes it particularly apt for hedging.
Difference between forward market and spot market?
Spot market is also known as "cash market" where the commodities are sell on the current price or the spot rate and deliver immediately, where as in case of forward market, market dealing with commodities for future delivery at prices agreed upon today (date of making the contract).
