Forward contract

From The Jolly Contrarian
(Redirected from Forward sale)
Jump to navigation Jump to search
ISDA Anatomy™
incorporating our exclusive ISDA in a Nutshell™

Resources Wikitext | Nutshell wikitext | 1992 ISDA wikitext | 2002 vs 1992 Showdown | 2006 ISDA Definitions | 2008 ISDA | JC’s ISDA code project
Navigation Preamble | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14

Events of Default: 5(a)(i) Failure to Pay or Deliver5(a)(ii) Breach of Agreement5(a)(iii) Credit Support Default5(a)(iv) Misrepresentation5(a)(v) Default Under Specified Transaction5(a)(vi) Cross Default5(a)(vii) Bankruptcy5(a)(viii) Merger without Assumption
Termination Events: 5(b)(i) Illegality5(b)(ii) Force Majeure Event5(b)(iii) Tax Event5(b)(iv) Tax Event Upon Merger5(b)(v) Credit Event Upon Merger5(b)(vi) Additional Termination Event

Index: Click to expand:

Comments? Questions? Suggestions? Requests? Insults? We’d love to 📧 hear from you.
Sign up for our newsletter.

Premium version of this page

Forward contract
/ˈfɔːwəd ˈkɒntrækt/ (also “forward sale”, “forward purchase” or just “forward” (n.)
A over-the counter transaction under which one fellow agrees now to sell an asset to another at a pre-agreed price at some time in the future. It is different from a future, which is a standardised, exchange-traded contract for the delivery of a certain asset at a pre-set date in the future.

Forwards have two main applications:


As a way of locking in today a price for an asset you will only need in the future. It is a way of buying an asset without hacing to funds full purchase price before the point where you actually need the asset. You settle the payment and delivery at the time the contract matures.


Often used in financing arrangements such as repurchase agreements, which comprise simultaneously executed spot sale and forward purchase — so I transfer title to this thing, against agreeing to take it back from you at an agreed price at a stated time in the future. In this case the “lender” avoids taking exposure to the market value of the asset, but is able to have and hold it as collateral — together with margin — against the “borrower”’s ultimate repayment obligation.

“Forwards” versus “futures”

Forward contracts are private, bilateral, over-the-counter contracts that may be customised to the parties’ hearts’ content. They can thus be contrasted with futures contracts, which are exchange-traded, centrally cleared, standardised contract referencing the forward price of a commoditised asset, where there is no opportunity for customisation.

Popular types of forward contract

See also