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Traded by bank dealers via a network of telephones and computerized dealing systems describes a forward contract.
A forward contract is a tailored agreement between two parties to buy or sell an asset at a predetermined price on a future date. A forward contract can be used for hedging or speculation, but due to its non-standardized nature, it is best suited for hedging.
A forward contract is a customizable derivative contract between two parties to buy or sell an asset on a future date at a specified price. They can be customized to include a particular commodity, amount, and delivery date.
They are considered over-the-counter (OTC) instruments because they are not traded on a centralized exchange.
Forward contracts, for example, can help agricultural producers and users hedge against changes in an underlying asset or commodity price.
Financial institutions that initiate forward contracts face a higher level of settlement and default risk than contracts marked to market regularly
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