CURRENCY FORWARD

In foreign exchange market, a binding contract which sets the exchange rate for purchasing or selling a currency in the future. It is a hedging tool in essence that does not involve any upfront payment. The other key benefit of currency forward is it can be designed to a specific amount and delivery period. The settlement can be either in cash or on a delivery basis, granted the option is mutually acceptable and stated beforehand in the contract. These are over-the-counter instruments. Also called outright forward.