Finance: Forward (en)

In finance, the term “forward” is often used to refer to a financial contract or instrument that represents a future obligation to buy or sell an asset at a specified price and date.

A forward contract is an agreement between two parties to buy or sell an underlying asset (such as a commodity, currency, or stock index) at a future date, at a price agreed upon at the time of the contract. The price is typically based on the current market price of the asset, adjusted for expected changes in supply and demand.

Forward contracts are often used to manage risk by allowing buyers and sellers to lock in a price for a future transaction, thereby protecting themselves against price fluctuations. They are commonly used in industries such as agriculture, energy, and finance, where price volatility can have a significant impact on profitability.

In addition to forward contracts, there are also other types of financial instruments that incorporate the concept of a forward price, such as forward rate agreements and forward currency contracts. These instruments are used to manage interest rate and currency risks, respectively.