Forward Contract
A forward contract is a derivative which binds two parties to a transaction in the future.
A forward contract is a derivative which binds two parties to a transaction in the future. For a given underlying asset the forward contract is defined by its quantity, maturity, and strike price. Forward contracts are settled once at the end of the contract’s duration.
Forward contracts are generally settled by assessing the value of the contract and the party realizing a loss will pay the party realizing a gain that amount in their chosen currency. However, it is also possible for the contract to be settled with the actual transaction specified in the agreement. Forward contracts are negotiated between parties on a case-by-case basis.
This makes the contracts very useful as hedges against portfolio risk. However, the unique nature of the contract results in very low liquidity, making it difficult for either party to exit their position before maturity.
Forward Contract is a concept relevant to Bitcoin, finance, or blockchain technology that investors should understand. Onramp's comprehensive Bitcoin glossary provides clear explanations of Forward Contract and hundreds of other terms to support informed investment decisions.
Frequently Asked Questions
What is Forward Contract?
Forward Contract is a term used in Bitcoin, finance, or blockchain technology. Understanding Forward Contract helps investors and enthusiasts build a stronger foundation of knowledge about digital assets and financial markets.
Why is Forward Contract important?
Forward Contract is relevant to understanding how Bitcoin, financial markets, or blockchain technology operates. Knowledge of such concepts helps investors make better-informed decisions about their portfolios.
Where can investors learn more about Forward Contract?
Onramp's Bitcoin glossary offers detailed, accessible explanations of Forward Contract and over 500 other terms related to Bitcoin, finance, and blockchain technology for investors at all experience levels.
