Deliverable Forward Contract
A binding agreement to exchange a specific amount of currency at a fixed rate on a future date, where physical delivery of both currencies takes place.
Explore FX hedging →Glossary
CURRENCY HEDGER
Deliverable FX & Hedging Glossary.
A practical guide to foreign exchange, deliverable forwards, currency hedging, settlement and institutional FX terminology. Understand the language of global currency markets and make more informed decisions about managing currency exposure.
01
Core Deliverable FX Concepts
Foreign Exchange Forward Contract
A customised OTC agreement that locks in an exchange rate today for settlement at a future date, helping businesses manage currency risk.
Explore forward contracts →Spot Contract
An FX transaction agreed at the current market exchange rate and normally settled within two business days, depending on the currency pair.
Learn about spot FX →Deliverable FX Transaction
A currency transaction where the underlying currencies are physically exchanged between counterparties at settlement.
Understand currency delivery →Currency Pair
Two currencies quoted against one another, such as EUR/USD, GBP/USD or USD/CHF, representing the relative value of one currency against another.
Explore FX markets →Base Currency
The first currency in an FX pair. In EUR/USD, EUR is the base currency and USD is the quote currency.
Learn FX terminology →
02
Forward Pricing & Structure
Forward Rate
The agreed exchange rate for a future FX transaction, derived from the spot rate and the interest-rate differential between the two currencies.
Learn how rates are calculated →Forward Points
The adjustment added to or subtracted from the spot rate to determine the forward exchange rate.
Explore forward pricing →Forward Premium
A situation where the forward rate is higher than the spot rate, generally reflecting interest-rate differentials.
Understand FX pricing →Forward Discount
A situation where the forward rate is lower than the spot rate, reflecting the relative interest rates of the currencies.
Understand forward discounts →Value Date
The date on which the currencies specified in an FX transaction are exchanged and settlement takes place.
Learn about settlement →Notional Amount
The total contractual amount of currency referenced by an FX transaction or hedging instrument.
Understand trade sizing →Tenor
The length of time between the trade date and the maturity or settlement date of an FX contract.
Explore FX forwards →Broken-Date Forward
A forward contract with a maturity date that does not correspond to a standard market tenor such as one month, three months or one year.
Explore forward solutions →Bid-Ask Spread
The difference between the price at which a market participant can buy a currency and the price at which it can sell it.
Understand FX pricing →
03
Hedging & Risk Management
Currency Hedging
The practice of reducing the financial impact of exchange-rate movements using instruments such as forwards, options and swaps.
Protect your business →FX Exposure
The risk that movements in foreign exchange rates will affect the value of future income, expenses, assets or liabilities.
Manage FX exposure →Hedging Strategy
A structured approach to managing currency risk using suitable FX instruments and defined objectives.
Build your strategy →Cash Flow Hedging
Using FX instruments to reduce uncertainty around future cash flows affected by currency movements.
Stabilise revenue →Transaction Risk
The risk that exchange-rate movements between the agreement and settlement of a transaction change its underlying value.
Reduce transaction risk →Counterparty Risk
The possibility that the other party to an OTC FX transaction fails to meet its contractual obligations.
Understand counterparty risk →Natural Hedge
Managing currency exposure by matching foreign-currency revenues and expenses without necessarily using a derivative.
Explore risk management →Hedge Ratio
The proportion of an underlying currency exposure that is covered by a hedging instrument.
Explore hedging strategies →Hedge Effectiveness
A measure of how successfully a hedge offsets movements in the underlying currency exposure.
Learn about FX risk →
04
Settlement & Delivery Mechanics
Physical Settlement
The actual exchange of the contracted currencies at maturity in a deliverable FX transaction.
Learn about settlement →Settlement Risk
The risk that one party delivers currency but does not receive the other currency as expected. This is also known as Herstatt risk.
Manage settlement risk →Payment versus Payment (PvP)
A settlement mechanism designed to ensure that both sides of an FX transaction are settled simultaneously.
Explore secure settlement →Maturity Date
The date on which a forward contract expires and the agreed settlement obligations become due.
Understand contract timelines →Settlement Instructions
The payment and account details required to complete the delivery and settlement of an FX transaction.
Understand FX settlement →Cut-Off Time
The deadline by which instructions or payments must be submitted for processing on a particular business day.
Explore settlement →
05
Related FX Instruments
Non-Deliverable Forward (NDF)
A forward contract settled in cash rather than through physical delivery, commonly used for currencies subject to restrictions.
Compare NDFs and deliverable forwards →FX Swap
A transaction combining a spot exchange with a simultaneous forward exchange that reverses the currency position at a later date.
Explore FX swaps →Forward Roll
Extending an existing forward position to a new future value date, subject to prevailing market pricing.
Learn about forward rolls →Currency Option
A financial contract giving the holder the right, but not the obligation, to exchange currency at a specified rate.
Explore hedging instruments →FX Fixing
A published reference exchange rate established at a specified time and used for valuation, settlement or financial reporting.
Understand FX markets →Mark-to-Market
The process of valuing an existing FX position using current market prices to determine its unrealised gain or loss.
Understand FX valuation →
06
Advanced & Institutional Concepts
Over-the-Counter (OTC)
A market where financial contracts are privately negotiated between counterparties rather than traded on a central exchange.
Understand OTC FX markets →Long Position (Forward)
The party in a forward contract agreeing to buy the specified currency at the agreed future value date.
Learn FX positions →Short Position (Forward)
The party in a forward contract agreeing to sell the specified currency at the agreed future value date.
Understand FX exposure →Cost of Carry
The financing cost or benefit associated with holding a currency position, reflected in the pricing of forward contracts.
Learn forward pricing →Interest Rate Differential
The difference between the interest rates applicable to two currencies, which is a key factor in determining forward rates.
Understand interest-rate effects →Liquidity
The availability of buyers and sellers in a market and the ability to transact efficiently without significantly moving price.
Explore FX liquidity →Market Maker
A financial institution or liquidity provider that continuously provides bid and offer prices in a market.
Explore institutional FX →Liquidity Provider
A bank or financial institution that supplies executable FX pricing and liquidity to market participants.
Learn about FX liquidity →Execution
The process of completing an FX transaction at an agreed exchange rate and for a specified settlement date.
Explore FX execution →Price Discovery
The process through which market participants establish currency prices based on available liquidity, orders and information.
Understand FX markets →
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