forward market

economics

Also known as: forward exchange, forward trading, forward transaction(Show More)

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Last updated

July 23, 2026

Quick Summary

A forward market is an agreement to buy or sell an asset at a predetermined price on a specified future date. This differs from a simple forward purchase or sale in the cash market, which involves the actual delivery of the commodity at the agreed-upon time.12

Futures contracts, which are similar to forward contracts, are commercial agreements for the purchase or sale of specified quantities of a commodity at specified future dates. These contracts originated in the trade of agricultural commodities. Futures markets provide a mechanism for hedging, allowing merchants and processors to insure against the risk of price fluctuations.2

While both forward and futures markets involve future transactions, futures contracts are typically standardized and traded on exchanges, whereas forward contracts are often customized and traded over-the-counter.2

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international payment and exchange
Forward exchange
The transactions in which one currency is exchanged directly for another are known as spot transactions. There can also be forward transactions, consisting of contracts to exchange one currency for another at a future date, perhaps three months ahead, but at a rate…
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The transactions in which one currency is exchanged directly for another are known as spot transactions. There can also be forward transactions, consisting of contracts to exchange one currency for another at a future date, perhaps three months ahead, but at a rate…
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futures
Economic functions of the futures contract
…the specified commodity or a forward market, where the delivery of the specified commodity is made at some later date. Futures markets, on the other hand, generally permit trading in a number of grades of the commodity to protect hedger sellers from being “cornered” by speculator buyers who might otherwise…
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…the specified commodity or a forward market, where the delivery of the specified commodity is made at some later date. Futures markets, on the other hand, generally permit trading in a number of grades of the commodity to protect hedger sellers from being “cornered” by speculator buyers who might otherwise…
Read More