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Forward Contract Definition

A forward contract is a private agreement to buy or sell an asset at a predetermined price on a specified future date.

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What is a Forward Contract?

Unlike futures, forward contracts are typically customized and traded over the counter rather than on an exchange.

They are often used to hedge against future price or currency movements.

Example of Forward Contract

A company agreeing today to exchange currency at a fixed rate in three months is using a forward contract.

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