Forward Contract - Revision history

Ferret: grammar

2009-01-17T22:21:52Z

grammar

CSGuy at 04:43, January 12, 2008

2008-01-12T04:43:44Z

Aschlafly: undeadend

2007-09-18T15:52:33Z

undeadend

TraJSmith: New page: A forward contract is an agreement between two parties to, at a future date, exchange a good at an agreed price. A very common, but not universal, meaning of the term is where a business ...

2007-09-06T18:25:15Z

New page: A forward contract is an agreement between two parties to, at a future date, exchange a good at an agreed price. A very common, but not universal, meaning of the term is where a business ...

New page

A forward contract is an agreement between two parties to, at a future date, exchange a good at an agreed price. A very common, but not universal, meaning of the term is where a business will enter into a forward contract with a bank to purchase a foreign currency on a future date.

Suppose a US company is going to import a product from Canada. Delivery is expected in three months, with payment due to the supplier thirty days after. The importing US company may enter into a forward contract to purchase the requuired amount of Canadian dollars in four months. This protects the importing company from the risk of a rising Canadian dollar during the period between contract agreement and payment due. However, it will also prevent any unexpected profit that would occur in the same period were the Canadian dollar to fall.

There is no secondary market for forward contracts. The price of foreign currency contracts is determined mathematically based on the difference in interest rates between the two countries.

[[Category:Business]]
[[Category:Finance]]

← Older revision		Revision as of 22:21, January 17, 2009
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−	A '''forward contract''' is an agreement between two parties to~~, at a future date,~~ exchange a [[good]] at an agreed price. A very common, but not universal, meaning of the term is where a business will enter into a forward contract with a bank to purchase a foreign currency on a future date.	+	A '''forward contract''' is an agreement between two parties to exchange a [[good]] at a future date at an agreed price. A very common, but not universal, meaning of the term is where a business will enter into a forward contract with a bank to purchase a foreign currency on a future date.

	Suppose a [[United States]] company is going to import a product from [[Canada]]. Delivery is expected in three months, with payment due to the supplier thirty days after. The importing US company may enter into a forward contract to purchase the required amount of Canadian dollars in four months. This protects the importing company from the risk of a rising Canadian dollar during the period between contract agreement and payment due. However, it will also prevent any unexpected profit that would occur in the same period were the Canadian dollar to fall.		Suppose a [[United States]] company is going to import a product from [[Canada]]. Delivery is expected in three months, with payment due to the supplier thirty days after. The importing US company may enter into a forward contract to purchase the required amount of Canadian dollars in four months. This protects the importing company from the risk of a rising Canadian dollar during the period between contract agreement and payment due. However, it will also prevent any unexpected profit that would occur in the same period were the Canadian dollar to fall.

← Older revision		Revision as of 04:43, January 12, 2008
Line 1:		Line 1:
−	A forward contract is an agreement between two parties to, at a future date, exchange a [[good]] at an agreed price. A very common, but not universal, meaning of the term is where a business will enter into a forward contract with a bank to purchase a foreign currency on a future date.	+	A '''forward contract''' is an agreement between two parties to, at a future date, exchange a [[good]] at an agreed price. A very common, but not universal, meaning of the term is where a business will enter into a forward contract with a bank to purchase a foreign currency on a future date.

	Suppose a [[United States]] company is going to import a product from [[Canada]]. Delivery is expected in three months, with payment due to the supplier thirty days after. The importing US company may enter into a forward contract to purchase the required amount of Canadian dollars in four months. This protects the importing company from the risk of a rising Canadian dollar during the period between contract agreement and payment due. However, it will also prevent any unexpected profit that would occur in the same period were the Canadian dollar to fall.		Suppose a [[United States]] company is going to import a product from [[Canada]]. Delivery is expected in three months, with payment due to the supplier thirty days after. The importing US company may enter into a forward contract to purchase the required amount of Canadian dollars in four months. This protects the importing company from the risk of a rising Canadian dollar during the period between contract agreement and payment due. However, it will also prevent any unexpected profit that would occur in the same period were the Canadian dollar to fall.

@@ Line 1: / Line 1: @@
-A forward contract is an agreement between two parties to, at a future date, exchange a good at an agreed price.  A very common, but not universal, meaning of the term is where a business will enter into a forward contract with a bank to purchase a foreign currency on a future date.
+A forward contract is an agreement between two parties to, at a future date, exchange a [[good]] at an agreed price.  A very common, but not universal, meaning of the term is where a business will enter into a forward contract with a bank to purchase a foreign currency on a future date.
-Suppose a US company is going to import a product from Canada.  Delivery is expected in three months, with payment due to the supplier thirty days after.  The importing US company may enter into a forward contract to purchase the requuired amount of Canadian dollars in four months.  This protects the importing company from the risk of a rising Canadian dollar during the period between contract agreement and payment due.  However, it will also prevent any unexpected profit that would occur in the same period were the Canadian dollar to fall.
+Suppose a [[United States]] company is going to import a product from [[Canada]].  Delivery is expected in three months, with payment due to the supplier thirty days after.  The importing US company may enter into a forward contract to purchase the required amount of Canadian dollars in four months.  This protects the importing company from the risk of a rising Canadian dollar during the period between contract agreement and payment due.  However, it will also prevent any unexpected profit that would occur in the same period were the Canadian dollar to fall.
 There is no secondary market for forward contracts.  The price of foreign currency contracts is determined mathematically based on the difference in interest rates between the two countries.