Search results
Results From The WOW.Com Content Network
In finance, a forward contract, or simply a forward, is a non-standardized contract between two parties to buy or sell an asset at a specified future time at a price agreed on in the contract, making it a type of derivative instrument.
We define the forward price to be the strike K such that the contract has 0 value at the present time. Assuming interest rates are constant the forward price of the futures is equal to the forward price of the forward contract with the same strike and maturity. It is also the same if the underlying asset is uncorrelated with interest rates.
The forward market is the informal over-the-counter financial market by which contracts for future delivery are entered into. It is mainly used for trading in foreign currencies , where the contracts are used to hedge against foreign exchange risk .
A forward contract is an agreement between two parties to exchange at a fixed future date a given quantity of a commodity for a specific price defined when the contract is finalized. The fixed price is also called forward price. Such forward contracts began as a way of reducing pricing risk in food and agricultural product markets.
The forward price (or sometimes forward rate) is the agreed upon price of an asset in a forward contract. [ 1 ] [ 2 ] Using the rational pricing assumption, for a forward contract on an underlying asset that is tradeable, the forward price can be expressed in terms of the spot price and any dividends.
That's more than enough to buy one share of Pfizer (NYSE: PFE), which currently trades below $27 per share. Pfizer's current forward dividend yield of 6.5% is near its highest level in 15 years.
However, forward contracts were often not honored by either the buyer or the seller. For instance, if the buyer of a corn forward contract made an agreement to buy corn, and at the time of delivery the price of corn differed dramatically from the original contract price, either the buyer or the seller would back out. Additionally, the forward ...
David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the...