What is FORWARD?

A bilateral OVERTHECOUNTER DERIVATIVE that permits the purchaser to buy, and the seller to sell, a reference ASSET at a predetermined future price and future date. Unlike a SWAP, a forward contract features no intervening cash FLOWS, simply a final cash exchange at the conclusion of the contract. Forwards are highly customizable; the two parties can negotiate terms regarding amount, SETTLEMENT, maturity, and UNDERLYING reference. (See diagram on opposite page.) See also DISCOUNT, FORWARD, PREMIUM, PRICE, RATE, RATE AGREEMENT, NONDELIVERABLE FORWARD.

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