The Forward

The forward is a financial contract where two parties agree to buy or sell an asset at a specific price on a future date. It helps investors and businesses lock in prices, reducing the risk of price fluctuations. Unlike options, forwards are customized agreements traded directly between parties, with the terms tailored to their needs. At the agreed future date, the buyer pays the agreed price, and the seller delivers the asset. This tool is commonly used in commodities and financial markets to manage price risks and plan budgets more effectively.