A forward rate is the exchange rate for a foreign currency, at a future point in time, and is obtained through a forward contract. Essentially, a forward contract is an agreement between two parties, who intend to exchange two different currencies at a specified rate, at a future date. This agreement – the forward contract – can result in one party receiving the better end of the bargain, depending on whether the exchange rate between those two currencies moves as predicted, and what the exchange rate is on the date that the forward contract is exercised (the date the currencies are exchanged).
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